Crude oil prices slipped on Thursday as the market focused on oversupply and fading expectation of a production freeze. Global crude oil benchmark Brent was down 10 cents at $48.95 a barrel by 1230 GMT, having closed down 1.8 percent on Wednesday. U.S. light crude oil was down 15 cents at $46.62 a barrel, after dropping 2.8% on Wednesday.
The National Hurricane Center is warning that interests in the northwestern Bahamas and Florida should monitor the progress of a tropical wave disturbance known as Invest 99-L, and already there are signs in the oil market that oil companies are heeding the warning.
Crude oil prices swung wildly into the positive territory yesterday. The rally eventually came to a halt around the $50 per barrel handle for Brent and $48 for WTI, and both contracts have been trending lower from these levels until an hour or so ago. It looks like oil prices have now found some short-covering support ahead of today’s official U.S. crude oil inventories report, due at 15:30 BST (10:30 ET).
The bulls are back and the bears are in trouble. The crude oil market enters bull market territory just 3 weeks after dipping into bear land. It looked like a classic short squeeze ahead of the September crude oil expiration and it is clear some traders had it all wrong.
Crude oil prices continue to rally as the dollar weakens and demand expectations rise. Bear traders are running for cover as more evidence that the fallout from the Brexit vote was not as bad as anticipated and the Federal Reserve, in their minutes, seemed to suggest that there are no worries about inflation, which would mean the odds of an interest rate hike has gone down considerably.
While there was a lot of talk about Friday’s Baker Hughes rig count, it is what they did not tell you that may be what counts. On Friday, Baker Hughes reported that the number of active U.S. oil rigs increased by 17--the seventh weekly increase and the most in a year.
They said it could not be done, but OPEC and non-OPEC may go ahead and do it anyway. It is looking more likely to the crude oil trade that a deal to freeze oil production could get done. Last week it was Saudi Arabian energy minister Khalid al-Falih who signaled he was open to an agreement.
A year ago today the Bank of China shocked global markets by devaluing its currency and helped set up the environment for an oil market crash. While the oil market looks weak due to seasonal factors and high inventories, do we have the same situation a year later that can set up an oil market crash? I think not.
The first round of fundamental data hit the media airwaves mid-day with the release of the EIA forward projections followed by the API data late in the day. The EIA report was biased to the bearish side as they raised its estimated for U.S. production (see the charts below for more details).
The American Petroleum Institute (API), an industry group, reported a sharper-than-expected 2.1 million barrel rise in U.S. weekly crude stockpiles. As a result, hopes that the official data from the EIA would reveal a 1.3 million decrease – the first decline in two weeks – were dashed.