U.S. West Texas Intermediate crude oil futures are trading slightly better on Friday as Hurricane Laura moved beyond the heart of the U.S. oil industry in Louisiana and Texas without causing any major damage to production and refining facilities.
With refineries spared from feared massive flooding, the initial assessment shows no damage to the upstream or downstream facilities. Additionally, crude oil has given back most of the storm premium and could return to its elongated holding pattern.
U.S. Energy Information Administration Weekly Inventories Report
On Wednesday, the EIA reported a crude oil inventory draw of 4.7 million barrels for the week to August 21. At 507.8 million barrels, oil inventories are 15 percent above the five-year average for this time of the year. Analysts had expected an inventory draw of 3.833 million barrels for the week to August 21.
In gasoline, the EIA estimated an inventory draw of 4.6 million barrels, compared with a decline of 3.3 million barrels a week earlier that sparked hopes the excessive supply of gasoline was being drained by recovering demand for fuels. Gasoline production last week averaged 9.5 million bpd, up from 9.4 million bpd in the previous week.
In distillate fuels, the EIA reported an inventory increase of 1.4 million barrels, after a modest build of 200,000 barrels a week earlier. Distillate fuel production rose last week, to 5.1 million bpd, compared with 4.7 million bpd a week earlier.
Refineries…
U.S. West Texas Intermediate crude oil futures are trading slightly better on Friday as Hurricane Laura moved beyond the heart of the U.S. oil industry in Louisiana and Texas without causing any major damage to production and refining facilities.
With refineries spared from feared massive flooding, the initial assessment shows no damage to the upstream or downstream facilities. Additionally, crude oil has given back most of the storm premium and could return to its elongated holding pattern.
U.S. Energy Information Administration Weekly Inventories Report
On Wednesday, the EIA reported a crude oil inventory draw of 4.7 million barrels for the week to August 21. At 507.8 million barrels, oil inventories are 15 percent above the five-year average for this time of the year. Analysts had expected an inventory draw of 3.833 million barrels for the week to August 21.
In gasoline, the EIA estimated an inventory draw of 4.6 million barrels, compared with a decline of 3.3 million barrels a week earlier that sparked hopes the excessive supply of gasoline was being drained by recovering demand for fuels. Gasoline production last week averaged 9.5 million bpd, up from 9.4 million bpd in the previous week.
In distillate fuels, the EIA reported an inventory increase of 1.4 million barrels, after a modest build of 200,000 barrels a week earlier. Distillate fuel production rose last week, to 5.1 million bpd, compared with 4.7 million bpd a week earlier.
Refineries processed 14.7 million bpd of crude oi last week after run rates fell to 14.5 million bpd during the previous week. This week the numbers would likely be even lower as hurricane Laura forced the shutdown of several facilities on the Gulf Coast.
Weekly Technical Analysis
Weekly October WTI Crude Oil
Trend Indicator Analysis
The main trend is up according to the weekly swing chart. The uptrend was reaffirmed this week when buyers took out the previous high at $43.68. The main trend will change to down on a move through $23.26.
The main range is $60.75 to $23.26. Its 50% to 61.80% retracement zone at $42.01 to $46.43 is the major resistance.
The short-term range is $23.26 to $43.68. If the main trend changes to down then its retracement zone at $33.47 to $31.06 will become the primary downside target. This should be considered a value zone so look for buyers to return on a test of this area.
Weekly Technical Forecast
Based on this week's price action, the direction of the September WTI crude oil market is likely to be determined by trader reaction to the 50% level at $42.01.
Bullish Scenario
A sustained move over $42.01 will indicate the presence of buyers. This could lead to a quick test of the minor high at $43.78. Taking out this level could trigger an acceleration to the upside since the weekly chart indicates there is no resistance until $46.43.
Bearish Scenario
A sustained move under $42.01 will signal the presence of sellers. The first downside target is a minor bottom at $39.00. Taking out this level could trigger a further decline into $33.47 over the near-term.
Weekly Outlook
Next week could start off with a slightly bearish tone as traders continue to wonder where demand is going to come from. Further ahead, demand expectations are expected to remain bearish. Recent reports and comments from officials indicate that global oil demand won't return to 2019 levels until at least 2022.
The latest monthly estimate from the IEA, EiA and OPEC all suggest that consumption will not recover to pre-pandemic levels next year. Meanwhile, the contango between Brent crude for nearby delivery and six-months ahead remained near its widest since late May at more than $.2.00.
Additionally, even with Hurricane Laura barreling at major oil facilities in Louisiana, all the rally could produce was a high 10 cents better than the previous high. Traders haven't even been reacting to the weaker dollar, which should have driven up demand for dollar-denominated crude oil.
The volatility is also extremely low, which could mean two things: We're in for more rangebound trading or preparing for a major breakout in either direction.
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Comments
Technically speaking, the 100 Day Moving Avg. is still some 17-18% below its 200 Day Moving Avg. & that may still take several weeks to cross.
Having said that it is important that production, supply remains on lower side for better oil prices.