It was not just the hurricanes that impacted supply as a reported 703,000 barrel drop in Cushing, Okla., helped reduce supply as well. We know that supply will rebound in the coming weeks and the number is supportive but the drawdown in Cushing, Oklahoma is supportive as well. The API also reported a 2.34 million barrel drop in gasoline supply as well as a 944,000 barrel increase in distillate stocks.
Dave Tolleris, meteorologist at WxRisk.com, said that next week we will have a storm that everyone will be talking about. While the Atlantic is a hot bed of tropical activity, Tolleris is very concerned about the development of Invest 99-L, which may be developing into a tropical depression or tropical storm today. If the storm is upgraded, it will be named Hermine, and according to Tolleris, the storm has the potential to become a category 4 Hurricane in the Gulf of Mexico next week.
Crude oil prices ended their best surge in 4 years in spectacular fashion as oil chose to focus on what seemed to be bearish fundamentals. The bear case yesterday was an agreement with Iraq and the Kurds, who would soon get oil flowing and a potential ceasefire in Nigeria.
The crude oil trade will be torn between trying to follow monetary policy or oil policy. Do you believe that OPEC and non-OPEC members can agree to freeze production or do you believe that the Fed can raise rates this year? Who do you trust?
Crude oil prices had a second day snapback taking the crude market back out of bear territory and getting crowded out shorts to run for cover. Oil prices found support from the UK stimulus but also from a report from the private forecaster Genscape that showed supply in the Cushing, Okla., delivery point fell yet again.
Crude oil prices tried to bottom after the Energy Information Administration's report but missed a key turnaround point by just a bit. We just missed closing at $40.83. So despite a big drop in crude supply in Cushing, Okla., and a big drop in gasoline supply, crude oil may have to go back down and test the low or reverse and close above $41.00 to confirm that we have finally hit bottom.
Crude oil closed in bear market territory as hedge funds amass the largest increase in its short position in history. Hedge funds added 56m barrels of extra short positions in Brent and WTI futures and option contracts putting bullish bets at a 5-month low.
The crude oil complex traded mostly on the defensive once again on Tuesday as the current fundamental outlook seems to have moved into the primary price driver’s seat. At the end of the day the American Petroleum Institute (API) released its weekly inventory snapshot with mostly small changes with the main feature being a large crude oil inventory build in Cushing, Okla., and a smaller than expected decline in gasoline stocks.
Crude oil prices continue to fade as the oil trade is losing confidence on the global economic outlook. Because of the slowdown, fears surrounding Brexit and an uncertain political environment, optimism that rising demand would meet the trend of decline production has been pushed back by a couple of months.
Crude oil closed below $44.00 a barrel, suggesting there are underlying weaknesses not only in the energy sector but in the global economy. It is becoming more clear the Brexit vote was just enough to slow demand from a path of market balance to the perception of continued oversupply.