Recap: The oil markets spent much of the trading session today on the defensive as the bearish contagion from global equity markets regarding concerns over the sputtering Chinese economy kept buyers on the sidelines. Additional price pressure appeared to come from the news that Nigerian Forcados crude exports resumed on Sunday. But the market appeared to lack conviction as it posted its smallest daily trading range in two weeks as it appeared many traders may have been absent from the market enjoying one of the final weeks of the summer vacation period.
Technical Analysis: Technically it appears that the market is possibly in a corrective phase of a market that had been in a nearly uninterrupted six week rally that had pushed crude prices upward by over $17 per barrel and heating oil prices upward by nearly a dollar per gallon. We would closely watch the daily stochastics which rolled over on Thursday, pointing to a downward trend for the third consecutive trading session today. We would not step into this market for any bargain hunting until these stochastics indicators stall and roll back over to indicate the start of another upward trend. We would look for the September WTI contract to initially test today’s low tomorrow at $81.76 followed by $79.90, $78.69 and $78.16. Resistance we see at $83.20, $83.81 and $84.89.
Fundamental News: Goldman Sachs in a research note to clients has adjusted their retail price forecast for U.S. gasoline to now average $3.60 per gallon through 2024. The investment bank also adjusted upward its U.S. RBOB-Brent crack spread by nearly a dollar to $21.19 per barrels for the next 18 months, but cut its NWE gasoil crack spread by two dollars to $28.27, with analysts seeing downside to the current 4Q23 pricing.
The EIA reported this afternoon with the release of its Monthly Drilling Productivity Report, it is forecasting U.S. crude oil output from U.S. shale producing regions in September will most likely fall to its lowest level since May 2023, due to declines in the Permian and Eagle Ford regions. Overall production is pegged at 9.415 million b/d down 15,000 b/d from August. Bakken oil output though is expected to rise in September to its highest level since November 2020. The EIA estimated the rig weighted average for new well oil production per rig would increase to 981 b/d, up 11 b/d from August estimates. The EIA also estimated the number of drilled but uncompleted wells (DUC) stood at 4,787 wells as of the end of July, down 5 wells from the prior month.
Shell said Monday that exports of Nigerian Forcados crude oil resumed on Sunday, basically a month after loadings had been suspended due to a potential leak at the export terminal.
IIR Energy said Monday it saw U.S. oil refiners will have 180,000 b/d of refining capacity offline for the week ending August 18th, increasing available refining capacity by 32,000 b/d from last week.
Delek reported to Texas regulators it had experienced an equipment malfunction at its 73,000 b/d Big Spring, Texas refinery.
Early Market Call – as of 8:20 AM EDT
WTI – September $81.25, down $1.26
RBOB – September $2.8928, down 1.34 cents
HO – September $3.0579, down 3.04 cents
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