8/18/2015 Market Update

The downtrend continues, as WTI has a lower technical objective of $39.44 if trades stay below $42.03.    US Crude futures hit an intra-day low of $41.42 yesterday, which has not been seen since early 2009. A Reuters poll has predicted U.S. commercial crude oil and gasoline inventories will fall by 600,000 bbls and 1.5 million bbls respectively in the latest week. U.S crude stockpiles are expected to rise as refineries prepare to reduce operations for maintenance season. Heat’s $1.5212 objective still remains in place while RBOB has a lower targeted support level of $1.6230 if trades stay below $1.6722.   

The same news that has troubled this bearish market still lingers. Refinery issues in the Midwest have been, and will continue to, reduce supply of gasoline and diesel fuel; spiking prices at the rack and at retail stations, while enabling arbitrage between racks further east. Crude continues to build at Cushing and further downward pressure on WTI as well as BRENT prices will happen with noise of OPEC’s production potentially reaching 33 million bpd next year.

Chinese stock markets continue to plummet falling more than 6% on Tuesday. There is concern that China may devalue its currency again which could negatively impact China’s consumption of import products. In a global market where supply already is outpacing demand a downturn in the world’s leading energy consumer could add downward pressure on oil prices. 

Reports from Kuwait’s state-owned oil company are indicating that the Shuaiba refinery is expected to be back online within the week after being shut off yesterday due to a fire. Exports of petroleum products were not affected.

According to the U.S. National Hurricane Center (NHC), there is a 90% chance of a tropical cyclone forming over the next couple of days a few hundred miles west-southwest of the Cape Verde Islands in the Atlantic Ocean. Cape Verde is several hundred miles off the western coast of Africa.    

Although the U.S. continues crude production and OPEC currently shows no signs of regress, bullish sentiments have found their way into the market. In fact, the IEA reported its forecast of global demand to have grown from 200,000 bpd to 1.6 million bpd which is the best in five years.

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