Recap: WTI slipped to a near double bottom on Monday, pressured by uncertainty as to whether or not OPEC’s efforts to support prices are working, and on news that production at Libya’s largest oil field is reaching pre-protest levels. Despite a rebound off of the day’s lows, prices finished below unchanged. September WTI fell 19 cents, or 0.4%, to settle at $49.39 a barrel, while Brent for October delivery slipped 5 cents, or 0.1%, to settle at $52.37 a barrel.
There appears to be underlying weakness in this market, as it continues to fail at $50 a barrel. Perhaps word out of the OPEC meeting, which is currently taking place, will provide an impetus for market direction.
September RBOB fell 1.64 cents, or 0.99%, to settle at $1.6450 a gallon, while September heating oil declined .0088 cents, or 0.53%, to settle at $1.6398 a gallon.
Fundamental News: Officials from a joint OPEC and non-OPEC technical committee are meeting in Abu Dhabi on Monday and Tuesday to discuss ways to increase compliance with the OPEC and non-OPEC output cut agreement.
Operations at Libya’s Sharara oil field returned to normal after a halt on August 6th due to armed protesters shutting down some facilities. A pipeline , that the protesters closed, which supplied jet fuel and gasoline from Zawiya to Tripoli was re-opened. The National Oil Corp gave no reason for the protest in Zawiya, which started on Sunday, forcing oil workers to gradually reduce production from Sharara. A local shipping source said loading operations in Zawiya had also been affected.
Nigeria’s Petroleum Ministry reported that the country’s average oil production including condensates, increased marginally to 2.06 million bpd in July from 2.05 million bpd in June. It is a sharp increase over the 1.6 million bpd output from a year ago when production facilities were hit by attacks from Niger Delta militants.
Iraq’s oil production in July fell by 150,000 bpd to 4.4 million bpd.
Goldman Sachs analysts stated that US oil production may increase by 950,000 bpd between the fourth quarter of 2016 and fourth quarter of 2017 across the Permian, Eagle Ford, Bakken and Niobrara shale plays, assuming the oil rig count remains at the current level. Separately, Goldman Sachs said data from the May-June period suggests that global demand for oil remains strong, driven by economic growth. Demand for the May-June period increased by 1.81 million bpd in the second quarter of 2017, above its previous quarterly growth forecast of 1.55 million bpd. Data in the US, Japan, India, China, Korea, Brazil, Mexico, Spain and France implies June global demand growth of 1.54 million bpd year on year. Goldman Sachs forecast demand growth of 1.6 million bpd in the second half of the year. It sees 2017 Brent prices at $52/barrel.
A JPMorgan analyst stated that WTI at $42/barrel in 2018 may prove too optimistic. The average stock draw has fallen from 750,000 bpd to 450,000 bpd in the second half, while the 2018 imbalance is at 1.3 million bpd from 1.1 million bpd, previously.
Bloomberg reported that total US waterborne LPG exports from Houston, Port Arthur, Philadelphia and Seattle fell by 45% to 647,581 bpd in the week ending August 3rd.
IIR reported that US oil refiners are expected to shut in 97,000 bpd of capacity in the week ending August 11th, increasing available refining capacity by 112,000 bpd from the previous week. IIR expects offline capacity to fall to 13,000 bpd in the week ending August 11th and to 13,000 bpd in the week ending August 18th.
Early Market Call - as of 9:00 AM EDT
WTI - Sep $49.06, down 33 cents
RBOB - Sep $1.6031, down 2.71 cents
HO -Sep $1.6204, down 1.95 cents
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