Recap: Oil futures traded higher on Tuesday, to trade at their highest level in two weeks as the market focus was more on tight supplies and a weak U.S. dollar than fears of an economic slowdown, which would mean weaker demand. Oil prices have whipsawed, supported by supply fears due to Western sanctions on Russia, but pressured by global central bank efforts to tame inflation which stoked fears that a potential recession could cut energy demand. The U.S. dollar slid to a two-week low against a basket of other currencies, bolstering oil demand by making it less expensive for buyers using other currencies. In a move that could pose a problem for supplies, Libya's new National Oil Corp (NOC) chief Farhat Bengdara rejected challenges to his appointment and as work resumed at some shuttered fields and ports. The 3-2-1 crack spread and the RBOB crack spread have both fallen to their lowest level since April. Crack spreads have continued to plunge since peaking in April; a sign that demand for product is dwindling. August WTI gained $1.62 a barrel, or 1.58%, to settle at $104.22, while Brent added $108, or 1.02%, to settle at $107.35 a barrel. RBOB Gasoline for August delivery gained 4.32 cents per gallon, or 1.32% to $3.3075. August heating oil lost 2.87 cents per gallon, or 0.79% to $3.6268
Market Analysis: August WTI came down to test the 10-day moving average, only to bounce right off of it, reaching its highest level in a week. It is now above the downward trend line that can be drawn off of the June high of $123.68. If we are to buy this market on a short-term basis, we would like to see a test of the aforementioned downward trend line, with a second bounce off of it. Resistance is seen at $110.15 and $113.50. Support is set at $100.24 and $94.55.
Fundamental News: Saudi Arabia's Foreign Minister said that he sees no shortage of oil in the market, but a lack of oil refining capacity, making it necessary to invest more in capacity to process crude oil into various oil products.
The American Automobile Association reported that the U.S. average retail gasoline price fell to $4.495/gallon on Tuesday, falling below $4.50 for the first time in nine weeks. The price of U.S. gasoline averaged more than $5 a gallon for the first time ever on July 11, but since then prices have come down, as overall supply has increased and U.S. demand has moderated to some extent, in part due to higher rates. According to EIA figures, even at the record of $5.02/gallon reached in mid-June, prices were still approximately 8% below the inflation-adjusted June 2008 highs around $5.41/gallon.
The Joint Organizations Data Initiative reported that Saudi Arabia's crude oil exports in May fell to a four-month low of 7.050 million bpd from 7.382 million bpd in April, while its crude oil output increased by 97,000 bpd on the month to 10.538 million bpd in May. Saudi Arabia’s refinery crude throughput increased by 211,000 bpd to 2.749 million bpd. The country’s direct crude burn increased by 185,000 bpd in May to 582,000 bpd.
Libya’s National Oil Company said Tuesday that preparations are now underway to export crude oil from Zueitina, Ras Lanuf and Es Sider following the lifting of its force majeure on terminals and oil fields. The company noted that five tankers are scheduled to load at the terminals between July 19th- July 21st . The force majeure had been in place for nearly three months.
Colonial Pipeline Co is allocating space for Cycle 42 shipments on Line 1, its main gasoline line from Houston, Texas to Greensboro, North Carolina.
Early Market Call – as of 8:50AM EDT
WTI – August $102.60, down $1.62
RBOB – August $3.2811, down 2.64 cents
HO – August $3.5744, down 5.24 cents
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