Boxed in crude oil looking for a break
Head of Commodity Strategy
Summary: Crude oil has gone increasingly stale during the past week as opposing forces keep the market locked in a relative tight range. Traders have instead been looking to the U.S. stock market for inspiration and direction. On tap today the weekly inventory from the U.S. Energy Information Administration. The market will be looking for signs of a potential demand impact from rising infection numbers across the biggest fuel consuming states.
What is our trading focus?
OILUKSEP20 – Brent Crude Oil (September)
OILUSAUG20 – WTI Crude Oil (August)
XOP:arcx – Oil & Gas Exploration & Production
XLE:arcx – Energy Select Sector SPDR Fund (Large-cap US energy stocks)
Crude oil has gone increasingly stale during the past week as opposing forces keep the market locked in a relative tight range. Three days in a row the August WTI crude oil contract has settled within a 2 tick range, with most of the daily price action taking its cue from movements in the U.S. stock market. The wall of resistance the market has struggle to break above is $41/b, the low on Friday March 6 from where the market gaped lower in response to Saudi Arabia's short-lived price war and just before global demand collapsed.
Almost seven months after the Covid-19 became known outside of China several countries are considering the reintroduction of virus-control measures as the number of infected remains out of control. Not least in the U.S. where the three biggest fuel consuming states are struggling with a rising number of infected and deaths. With OPEC+ production cuts looking solid the market is instead focusing on and worried about the demand impact from the current infection surge.
The U.S. Independent holiday weekend normally signals the beginning of the summer driving season when refineries run flat out to meet demand for gasoline. So far the pick up has failed to emerge with GasBuddy estimating that demand during the holiday weekend was down by more than 22% compared with last year.
WTI crude oil is currently stuck in a tight $41/b to $37/b range and even tighter if focusing on the shown trendline which is currently providing support at $40/b.
Later today at 14:30 GMT the U.S. Energy Information Administration will publish its 'Weekly Petroleum Status Report'. The American Petroleum Institute in their weekly update last night raised the prospects for a bigger-than-expected rise in crude oil stocks while seeing a small reduction in gasoline stocks.
The market is likely to be focusing on the implied demand for gasoline and distillates as renewed weakness could lead to a price damaging continued counter seasonal rise in fuel stocks.
As per usual I will post the result and market reaction on my Twitter handle @ole_s_hansen.
Latest Market Insights
Quarterly Outlook Q3 2022: The Runaway Train
- Central banks' attempts to kill inflation is a paradigm shift, which could end in a deep recession.
Tangible assets and profitable growth are the winnersWith US equities officially in a bear market, the big question is where and when is the bottom in the current drawdown?
Understanding the lack of investment appetite among oil majorsThe everything rally seen in recent quarters has become more uneven, as its strength is driven by commodities in short supply.
The pressure is on as the wind leaves the sailsWith cryptocurrencies in sharp decline, are we entering a crypto winter or is the bear market a healthy clean-up of the crypto space?
Why the Fed can never catch up and what turns the US dollar lower?Many other central banks are set to eventually outpace the Fed in hiking rates, taking their real interest rates to levels higher than the Fed will achieve.
Bank of Japan: Swimming against the tideThe Japanese economy has gone from the age of deflation to rapidly rising prices in no time, leaving the Bank of Japan in a pickle.
Green transformation detour and bear market hibernationWith the impending risk of global econonomic derailment, we share the five things investors need to consider in this new half year.
Crisis redux for the eurozone?Whether there's going to be a recession in Europe or not, the path towards a stable economy will be agonizing.
Technical Outlook: Gold, Oil and a remarkable multi-decade perspective on EquitiesThe Nasdaq bubble pattern, USDJPY resistance, crude oil uptrend losing steam and the technical outlook for USD.
China: the train of new development paradigm left the station two years agoChina is transiting to a new development paradigm, as they are hit by deteriorating terms of trade, a slower global economy and an uncertain future while continuing attempts to contain the pandemic.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)