Recap: The crude market retraced more than 62% of its recent move higher from a low of $66.86 to Wednesday’s high of $71.26 as it fell more than 2.5% on economic concerns. The market traded lower following the IEA’s warning that although the oil market was currently tightening and world oil demand would soon reach 100 million bpd in the next three months, global economic risks were mounting. It said a possible risk to its forecast lies in some key emerging economies, partly due to currency depreciations versus the dollar raising the cost of imported energy. There is also a risk to growth from an escalation of trade disputes. The oil market opened 13 cents lower and sold off to $68.37 by mid-morning, where is held some support. The market later traded sideways before further selling and extended its losses to over $2 as it sold off to a low of $68.35 ahead of the close. The October WTI contract settled down $1.78 at $68.59. The November Brent contract settled down $1.56 at $78.18. Meanwhile, the product markets also settled sharply lower, with the heating oil market settling down 3.42 cents at $2.2235 and the RBOB market settling down 4.19 cents at $1.9929.
Fundamental News: Genscape reported that crude oil stocks held in Cushing, Oklahoma in the week ending Tuesday, September 11th fell by 1,831,049 barrels on the week and by 1,612,853 barrels from Friday, September 7th to 25,822,889 barrels.
The IEA stated that world oil demand will surpass 100 million bpd in the next three months, tightening the market and putting pressure on prices. However it added that emerging market crises and trade disputes could impact demand. It maintained its forecast of strong growth in global oil demand this year of 1.4 million bpd and another 1.5 million bpd in 2019, unchanged from its previous forecast. The agency warned that oil prices could break above $80.00 per barrel unless other producers act to offset the loss of production from Iran and Venezuela. Global demand is expected to reach a high of 100.3 million bpd in the final quarter of this year, before moderating to 99.3 million bpd in the first quarter of next year. The call on OPEC crude in 2018 is seen at 32.3 million bpd and 31.9 million bpd in 2019. It reported that OPEC’s output increased to a 9-month high of 32.63 million bpd in August, led by Libya and Iraq. It sees non-OPEC oil output increasing by 2 million bpd in 2018 and 1.8 million bpd in 2019. OECD commercial stocks increased by 7.9 million barrels in July to 2.824 billion barrels.
US Energy Secretary Rick Perry told his Russian counterpart, Alexander Novak, that the US and Russia could work together as leading energy producers to ensure global market stability. Russia’s Energy Minister said Russia is open to finding ways to improve ties based on balance of interests. He said it is important to continue their cooperation including in G20. He also stated that energy dialogue should be open adding that such contracts would help improve ties in the current uneasy environment. Following the meeting, US Energy Secretary, Rick Perry, said that the US, Russia and Saudi Arabia are working together to ensure oil prices remain affordable and deserve credit for their success.
The Buzzard oilfield in the North Sea did not restart on Wednesday evening as hoped due to bad weather. The field was initially due to restart over the weekend after planned maintenance that began in early September.
Libya’s oil export ports and fields are working normally despite a gunman attack on the headquarters at the National Oil Corp’s Tripoli headquarters on Monday. Bloomberg reported that it according to trade sources Libyan oil production remains stable and is running above 1 million b/d.
Early Market Call – as of 8:00 AM EDT
WTI – Oct $68.90, up 31 cents
RBOB – Oct $1.9874, down 57 points
HO – Oct $2.2221, down 13 points
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