Higher markets as oil vaults to $43

Dow jumped up 42, advancers over decliners a mere 4-3 & NAZ gained 7.  The MLP index shot up another 5+ to the 295s (a new high for 2016) & the REIT index lost 5+ to the 336s.  Junk bond funds were higher along with stocks & Treasuries retreated.  Oil surged to the high 43s (see below) & gold slid back, taking it below 1250.

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CL.NYM

....Light Sweet Crude Oil Futures,M

....42.74

...1.66

(4.0%)

Oil climbed to the highest level in more than 4 months after a gov report showed US crude production dropped & futures rose.  Crude output fell to 8.95M barrels a day, the lowest since Oct 2014, Energy Information Administration data show.  Rigs targeting oil in the US slipped to the least since Nov 2009.  OPEC members & other producers plan to meet in Russia, possibly in May, in a push to freeze output & support oil prices, Iraq’s Deputy Oil Minister Fayyad Al-Nima said.

Russia doubts that there will be a freeze deal in the foreseeable future. After the discussions in Doha, the chances for a agreement are "relatively low," the Russian minister said.  Crude inventories climbed 2.08M barrels to 538M barrels last week, the highest level since 1930.  A 3M barrel gain was projected before the report.  Supplies at Cushing, Oklahoma, the delivery point for WTI & the nation's biggest oil-storage hub, dropped by 248K barrels.  Refineries bolstered operating rates by 0.2 percentage point to 89.4% of capacity.  US refiners typically increase utilization in Apr as they finish maintenance before the summer peak driving season.

• Oil Climbs to Highest Since November as U.S. Crude Output Drops

This rally smells.  Something is not right.  Oil production just below 9M barrels is about 5% below the record levels set a few months ago.  That is not a big deal!  Meanwhile, high inventories are not going away anytime soon.  The rally in stocks was modest, although the market is vastly overbought, & breadth was limited.  Today's oil rally is difficult to understand or believe.  Dow is within 200 of setting a new record, but this is a very tired market with low expectations as earnings season begins.

Dow Jones Industrials