Crude oil still looking for support

Ole Hansen

Head of Commodity Strategy, Saxo Bank Group

Summary:  Crude oil still looking for support as weak economic data weighs


The crude oil market has spent the past couple of weeks deflating and eventually removing the risk premium that followed the September 14 attack in Saudi Arabia on the Abqaiq oil-processing facility, the world’s biggest, and the Khurais oilfield. This after the immediate risk of retaliation and escalation faded and the Saudis managed to recover its production much sooner than expected. 

Two weeks of almost constant selling has seen both Brent and WTI crude oil return to the lower end of the range that has prevailed since June. The latest OPEC production survey carried out by Bloomberg showed the significant impact on Saudi production last month. The Kingdoms production slumped by 1.47 million barrels per day to 8.36 million thereby accounting for the bulk of OPEC's over all 1.59 million barrels/day reduction to 28.32 million, the biggest monthly drop since 2002 according to Bloomberg.

At 1430 GMT the Energy Information Administration will release its 'Weekly Petroleum Status Report' and while the American Petroleum Institute in their update last night saw a 5.9 million barrels drop, surveys are looking for an increase in the official figures.  
WTI crude oil has yet to establish support with the market still feeling the heat from a whole host of weak data from around the wold this week. A development which continues to raise questions and worries about crude oil demand going forward. A break below $53/b carries the risk of sending oil even lower towards the key area just above $50/b.

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