U.S. West Texas Intermediate crude oil futures are edging lower on Friday, but still holding on to their weekly gains. The price action suggests profit-taking is taking place ahead of the weekend or traders are concerned about over-valuations. A drop in demand for riskier assets and commodities is also pressuring prices amid renewed concerns over the financial stability of China’s Evergrande, which is facing a debt crisis.
Earlier in the session, oil prices jumped to a two-month high before retreating. Nonetheless, the markets are headed for a third straight week of gains, supported by global output disruptions and inventory draws.
Despite today’s minor setback, oil prices are likely to remain supported for months due to disruptions in U.S. Gulf Coast production following Hurricane Ida and other storms. The situation is so bad that U.S. refiners are being forced to turn to other countries for supply.
US Oil Refiners Pick Iraqi, Canadian Crudes to Replace Storm Losses – Traders
U.S. oil refiners hunting to replace lost after a storm hit the U.S. Gulf of Mexico last month have been turning to Iraqi and Canadian oil, while Asian buyers have been pursuing Middle Eastern and Russian grades, analysts and traders said.
Royal Dutch Shell, the largest producer in the U.S. Gulf of Mexico, this week said damage from Hurricane Ida to an offshore transfer facility will limit Mars sour crude supplies into early next year. The grade is used…
U.S. West Texas Intermediate crude oil futures are edging lower on Friday, but still holding on to their weekly gains. The price action suggests profit-taking is taking place ahead of the weekend or traders are concerned about over-valuations. A drop in demand for riskier assets and commodities is also pressuring prices amid renewed concerns over the financial stability of China’s Evergrande, which is facing a debt crisis.
Earlier in the session, oil prices jumped to a two-month high before retreating. Nonetheless, the markets are headed for a third straight week of gains, supported by global output disruptions and inventory draws.
Despite today’s minor setback, oil prices are likely to remain supported for months due to disruptions in U.S. Gulf Coast production following Hurricane Ida and other storms. The situation is so bad that U.S. refiners are being forced to turn to other countries for supply.
US Oil Refiners Pick Iraqi, Canadian Crudes to Replace Storm Losses – Traders
U.S. oil refiners hunting to replace lost after a storm hit the U.S. Gulf of Mexico last month have been turning to Iraqi and Canadian oil, while Asian buyers have been pursuing Middle Eastern and Russian grades, analysts and traders said.
Royal Dutch Shell, the largest producer in the U.S. Gulf of Mexico, this week said damage from Hurricane Ida to an offshore transfer facility will limit Mars sour crude supplies into early next year. The grade is used heavily by U.S. Gulf refiners and companies in South Korea and China, the top two export destinations for Mars, Reuters reported.
The United States generally exports more than 3 million barrels per day (bpd) of oil, mostly from the U.S. Gulf Coast. With overall fuel demand rebounding to pre-pandemic levels, refiners will need to make up for the Mars shut-ins.
The loss of up to 250,000 bpd has some U.S. refiners seeking replacements for fourth-quarter delivery, especially Iraq’s Basra crude, traders said. Others received supplies of sour crude from U.S. storehouses.
US Crude Stockpiles Fall to Lowest in 3 years, Gasoline Builds –EIA
U.S. crude oil inventories last week fell to the lowest in nearly three years while gasoline stockpiles rose, the Energy Information Administration said on Wednesday.
Crude inventories fell by 3.5 million barrels in the week to September 14 to 414 million barrels, compared with analysts’ expectations in a Reuters poll for a 2.4 million-barrel drop. Inventories now sit at their lowest levels since October 2018, and that tightness, along with strong demand, has helped drive oil prices higher.
Weekly figures on refining activity and oil production showed a return to pre-hurricane activity. Crude production jumped 500,000 barrels per day in the week to 10.6 million bpd, as Gulf offshore facilities resumed operations, Reuters reported.
Refinery runs rose by 960,000 bpd in the last week, with utilization rates up 5.4 percentage points to 87.5% of capacity as refiners restarted key units.
Overall product supplied jumped as a result of 21.1 million bpd, and for the past four weeks, product supplied – a proxy for demand – averaged nearly 21 million bpd, roughly in line with pre-pandemic levels.
Undercutting the optimism, U.S. gasoline stocks rose by 3.5 million barrels to 221.6 million barrels, compared with expectations for a 1.1 million barrel drop.
Distillate stockpiles, which include diesel and heating oil, fell by 2.6 million barrels versus expectations for a 1.2 million-barrel drop.
Net U.S. crude imports rose last week by 519,000 bpd, the EIA said.
Crude stocks at the Cushing, Oklahoma, delivery hub fell by 1.5 million barrels in the last week, the EIA said.
Weekly Technical Analysis
Weekly December 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 main top at $62.61. A trade through $61.11 will change the main trend to down.
Retracement Level Analysis
The minor range is $61.11 to $73.30. The market is currently trading on the strong side of its retracement zone at $67.21 to $65.77.
The short-term range is $55.54 to $73.30. Its retracement zone at $64.42 to $62.32 is the best support area. This zone is controlling the near-term direction of the market.
The main range is $37.70 to $73.30. If the main trend changes to down then its retracement zone at $55.50 to $51.30 will become the primary downside target and value area.
Weekly Technical Forecast
The direction of the December WTI crude oil market the week-ending October 1 will be determined by trader reaction to $72.61.
Bullish Scenario
A sustained move over $72.61 will indicate the presence of buyers. This could create the upside momentum needed to challenge a series of main tops at $74.77, $76.07 and $76.98.
Bearish Scenario
A sustained move under $72.61 will signal the presence of sellers. If this move generates enough downside momentum then look for the selling to possibly extend into the short-term retracement zone at $67.21 to $65.77.
Short-Term Outlook
The technical chart pattern indicates the upside bias is strengthening after forming a solid support base on the daily chart at $68.22 to $66.86.
However, we do believe the next rally will be a labored event with potential resistance lined up at $74.77 to $76.98.
The market remains well supported with potential value levels layered from $67.21 to $62.32.
Traders may not always be willing to buy strength at current price levels, but with the market supported by a number of bullish fundamental events, they are likely to continue to buy the dips.
Friday’s price action suggests the market is a little tired and ripe for a near-term setback. The move is not likely to trigger a major change in trend, but could lead to a break into a value area.
After a near-term pullback, we expect prices to rebound into new highs for the year on the back of inventory drawdowns, lower OPEC production, and strengthening demand.
The question is, “Is there any reason to chase the market higher at current price levels?” The market is currently being supported basically by week-old inventories data. Wednesday’s U.S. government report was based on data up to September 17.
As the industry continues to recover from Hurricane Ida, supply could rise, but will it be enough to offset increased demand? If it is then we may have seen the bottom in crude oil supply in last Wednesday’s report. If this is the case then prices could become rangebound for weeks until demand picks up later this year or early next year.
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I dont have any use for predictions based upon tea leave, palm reading, offal, or chart patterns.
To answer your question,
“Is there any reason to chase the market higher at current price levels?”
yes,
drillers are still frightened by the event last year when they actually had to pay money to get oil off their hands for a moment.
drillers are more frightened, long term, of the global warming activists` political power, threatening taxes and other measures to throttle oil production, while demand is still increasing.
The bottom line is that demand has been outstripping supply, consistently for many months, and everyone is steadily drawing down inventories, but the short sellers have still been in command in the markets, and so nobody is changing plans to increase cap ex.
I see a freight train barreling towards a bridge that is out, and nobody seems to care.....
To answer your question,
“Is there any reason to chase the market higher at current price levels?”
yes,
drillers are still frightened by the event last year when they actually had to pay money to get oil off their hands for a moment.
drillers are more frightened, long term, of the global warming activists` political power, threatening taxes and other measures to throttle oil production, while demand is still increasing.
The bottom line is that demand has been outstripping supply, consistently for many months, and everyone is steadily drawing down inventories, but the short sellers have still been in command in the markets, and so nobody is changing plans to increase cap ex.
I see a freight train barreling towards a bridge that is out, and nobody seems to care.....