Recap: A rise in U.S. oil production offset the 7.6 million barrel draw in U.S. oil stocks, taking the wind out of earlier gains in oil futures. Prices notched out new lows after falling from session highs, with August WTI stopping just above $45 a barrel, while at the same time, failing to penetrate support at $44.95. WTI settled at $45.49 a barrel, up 45 cents, or 1%. September Brent tacked on 22 cents, or 0.46%, to settle at $47.74 a barrel.
August RBOB rose less than half a cent to $1.521 a gallon, while August heating oil shed half a penny to $1.474 a gallon.
Fundamental News: The EIA reported that crude stocks fell by 7.564 million barrels in the week ending July 7th. It was the largest one-week drawdown since September 2016. Crude oil stocks held in Cushing, Oklahoma fell by 1.948 million barrels to 57.6 million barrels, the smallest level since November 2015. US crude production increased to 9.4 million bpd, up 59,000 bpd on the week. US crude exports increased to 918,000 bpd in the week ending July 7th, compared with 768,000 bpd in the previous week.
In its monthly report, OPEC stated that world demand for its oil will decline next year as US shale producers and other producers produce more, suggesting the oil market will see a surplus in 2018 despite the OPEC-led output cut. It forecast demand of its oil next year at 32.2 million bpd, down 60,000 bpd on the year. OPEC also reported that its output increased by 393,000 bpd in June to 32.611 million bpd, with output increases from Nigeria, Libya, Saudi Arabia and Iraq. OPEC’s Secretary General, Mohammad Barkindo, said compliance remains high with the output cut agreement and added that OPEC remains optimistic to helping the market to rebalance itself.
A Saudi industry source said Saudi Arabia planned to reduce shipments in August by more than 600,000 bpd, taking exports for the month to the lowest level this year.
Algeria’s Energy Minister, Mustapha Guitouni, said a joint meeting between OPEC and non-OPEC countries in Russia later this month will only discuss the oil market but will make no decisions.
Iran’s Deputy Oil Minister, Amir Hossein Zamaninia, said the country’s oil output is expected to increase to about 4 million bpd by the end of the year. Iran has been producing about 3.8 million bpd in recent months.
Libya’s oil production is expected to increase to 1.05 million bpd, up from 1.012 million bpd.
Nigeria’s Oil Minister, Emmanuel Ibe Kachikwu, said the country has no set timeframe to join OPEC oil production cuts. Nigeria is currently producing 1.7 million bpd of oil.
BP’s chief executive, Bob Dudley, said global oil markets are currently in balance and should tighten during the second half of the year as OPEC-led cuts help cut stock levels.
China is expected to increase its oil and natural gas pipelines during the coming years as the country moves to secure stable supplies and cut its reliance on coal. The National Development and Reform Commission and the National Energy Administration stated that the country’s pipeline network will stretch to 169,000 kilometers by 2020, with those for crude, refined oil and natural gas at 32,000 km and 104,000 km, respectively. The total length of the networks will increase to 240,000 km by 2025. The oil and gas pipeline networks ensure steady energy flows from foreign sources to the country and from remote border areas to prosperous inland cities.
IIR reported that US oil refiners are expected to shut in 111,000 bpd of capacity in the week ending July 14th, increasing available refining capacity by 59,000 bpd from the previous week. IIR expects offline capacity to fall to 29,000 bpd in the week ending July 21st.
Early Market Call - as of 9:00 AM EDT
WTI - Aug $45.68, up 19 cents
RBOB - Aug $1.5250, up 40 points
HO - Aug $1.4764, up 28 points
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