Recap: Oil futures ended the session up 2.5% on Friday after a U.S. official told Reuters that an immediate Saudi oil output boost was not expected, and as investors question whether OPEC has the room to significantly ramp up crude production. Oil prices that fell sharply earlier this week on a strong dollar and worries that the Fed may hike interest rates by a massive full percentage point are rebounding now that Fed officials are suggesting such a move is unlikely. The Fed's most hawkish policymakers on Thursday said they favored another 75-basis-point interest rate increase at the U.S. central bank's policy meeting this month, not the bigger rate raise that traders had raced to price in after a report Wednesday showed inflation was accelerating. The rate hike uncertainty, along with weak economic data, caused both benchmark contracts to drop at one stage on Thursday to below the Feb. 23 close, the day before Russia invaded Ukraine in what Moscow calls "a special military operation". Still, both Brent and WTI had clawed back nearly all losses by the end of the trading session. WTI for August delivery ended the session up $1.81, or 1.89%, to settle at $97.59 a barrel, for a weekly loss of $7.20 per barrel, or 6.87%. WTI is down $10.84, or 10.005 over the last two weeks. September Brent added $2.06, or 2.08%, to settle at $101.16 a barrel, losing $5.86 per barrel, or 5.48% this week. August RBOB added 2.64 cents, or 0.83 per gallon, to settle at $3.2132, down 23.39 cents, or 6.79% on the week, down 67.16 cents or 17.29% over the last three weeks. ULSD for August delivery gained 4.96 cents or 1.36% to settle at $3.6990 per gallon, up 2.61 cents per gallon, or 0.71% this week.
Technical Analysis: Oil futures rallied back on Friday, as it was most likely a bit overdone to the downside following a week of great volatility. WTI ‘s break below the 200-day moving average was met with a weak short covering rally, which took July WTI back above $96.47, the 50% retracement provided by the December low of $62.43 and the March high of $130.59. At this point we expect to see continued attempts to move lower, but would not discount a move toward $100, where we expect to see a lot of back and forth movement. Moves below the 200-day moving average should prompt some fresh selling, but we remain cautious, as this technical indicator is a sensitive one. Should we get a solid settlement below this level, we would look for a push toward $88.43, the 62% retracement of the aforementioned high and low.
Fundamental News: President Joe Biden will discuss energy supply, human rights, and security cooperation in Saudi Arabia on Friday on a trip designed to reset the U.S. relationship with the country. The White House said Biden would hold a bilateral meeting with Saudi King Salman bin Abdulaziz at the royal palace in Jeddah and then the president and his team would have a working session with Crown Prince Mohammed bin Salman, known as MBS, and Saudi ministers at the palace. A U.S. official told Reuters that Washington is not expecting Saudi Arabia to immediately boost oil production and that the United States was looking at what the OPEC+ group decides in its next meeting on August 3rd. President Biden said recently that he would not ask Saudi leaders directly to increase oil production. Instead, he would continue to make the case that all Gulf states should raise oil output.
A senior EU official said negotiations to bring Iran back into compliance with the 2015 nuclear accord are coming to an end, but it is not clear if they will result in an agreement between Tehran and world powers.
U.S. energy firms this week added oil and natural gas rigs for a second consecutive week. Baker Hughes reported that the oil and gas rig count increased by four to 756 in the week ending July 15th, its highest since March 2020. U.S. oil rigs increased by two to 599 this week, their highest since March 2020, while gas rigs were unchanged for a second consecutive week at 153.
Early Market Call – as of 8:25 AM EDT
WTI – August $99.83, up $2.24
RBOB – August $3.2990, up 8.58 cents
HO – Augusts $3.7131, up 1.41 cents
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