Recap: Oil futures came roaring back on Monday, adding to last week’s come back, as continued physical tightness overshadowed thoughts of demand destruction and as the U.S. dollar weakened. Market commentators also cited concerns about gas supply from Russia to Europe as boosting prices via a higher geopolitical risk premium. Last week, oil prices were pushed down by recession fears, a strong U.S. dollar and rising cases of COVID-19 in China. WTI climbed back above $100 for the first time in a week, with August WTI settling at $102.60 a barrel, up $5.01, or 5.1%, while Brent for September delivery gained $5.11, or 5.05%, to settle at $106.27. RBOB August delivery gained 5.11 cents per gallon, or 1.59% to $3.2643. August heating oil lost 4.35 cents per gallon, or 1.18% to $3.6555.
Technical Analysis: The geopolitical spotlight pushed WTI above $100 a barrel however it remains within the downward channel that can be depicted on a spot continuation chart. With the slow stochastics crossing to the upside, we would look for WTI to work toward the upper line of this channel, which is currently set at $102.48. Above this level additional resistance is seen at $105 and $111. Support is seen at $100 and below that at $94.43.
Fundamental News: White House economic adviser, Brian Deese, said U.S. gasoline prices are expected to keep declining this month. He said "We do anticipate that those gas prices should keep coming down over the course of the month."
Jorge Montepeque, who is credited with reforming some of the most important benchmarks for pricing oil said market forces would quickly undermine any scheme to impose a price cap on Russian oil, even if the United States and the European Union can convince top Asian importers to take part. He said the history of similar attempts to limit the price suggests that a cap would lead to higher, not lower prices, and to the emergence of a grey market for Russian oil. He said capping prices when markets are so tight is particularly difficult.
U.S. Treasury Secretary, Janet Yellen, described as "encouraging" talks with India about a proposed price cap on Russian oil that the U.S. is pushing to drive down oil prices and make it harder for Russia to fund its war in Ukraine. A senior Treasury official said India had made no promises on the oil price cap, but was working with the United States and had not "expressed hostility to this idea".
Europe is expected to import about 4.08 million tons of diesel from Asia, the Middle East, Russia and the U.S. so far in July, compared with 5.3 million tons imported in June.
The EIA reported that U.S. total shale regions oil production for August is seen up about 136,000 bpd from 9.068 million bpd. U.S. Bakken oil production in August is forecast to increase by 19,000 bpd to 1.192 million bpd, the highest level since December 2020, while U.S. Eagle Ford oil production for August is seen increasing by 25,000 bpd to 1.205 million bpd, the highest level since April 2020 and U.S. Permian Basin oil production for August is seen increasing by 78,000 bpd to 5.445 million bpd, the highest level on record.
IIR Energy reported that U.S. oil refiners are expected to shut in about 636,000 bpd of capacity in the week ending July 22nd, increasing available refining capacity by 33,000 bpd. Offline capacity is expected to fall to 357,000 bpd in the week ending July 29th.
Early Market Call – as of 8:20 AM EDT
WTI – August $100.90, down $1.70
RBOB – August $3.2362, down 2.81 cents
HO – Augusts $3.5560, down 9.56 cents
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