After the Brexit bash, global markets are trying to steady themselves as the historic shockwaves of the Brexit vote will continue to cause unease in global markets. The fact that Brexit will actually happen anytime soon is allowing the markets to try to act more normal even as everything in the world has changed.
The EIA reported crude oil fell by only 900,000 barres last week. That was a shocking contrast to the 5.5-million-barrel drop that we saw in the API report. What was more interesting is that in all of the most watched areas of crude supply, we saw a sizable drop in supply.
In spite of the latest forecast from the International Energy Agency (IEA) yesterday suggesting that the global crude oil market is already rebalancing the market has been in a retracement mode since late last week
There are more signs that the fundamentals are changing for crude oil and natural gas. Not only has Saudi Arabia raised prices for its oil in a sign that they have confidence they can maintain market share, but natural gas had its best move all year last week.
Crude oil prices are having a hard time trying to decide whether they should be focused on risks to supply or risks to demand. Early on Friday it appears that the risk to demand fears are outweighing risks to supply fears as the dollar rallies and economic concerns weigh.
Once again bearish news is hitting the crude oil complex and once again the market is hardly reacting to it. Reuters is reporting that some Canadian oil sands production restarted while the API reported yet another new all-time record high level of total combined inventories of crude oil and refined products.
Crude oil prices rebounded yesterday as the global risk to supply is risng at a time when global production may start falling. Not only are markets trying to assess the long term effect from the Alberta Canadian wildfires, but increasing risk to supply in Nigeria is making traders nervous. On top of that, Iran is signaling that it are ready to talk about a production freeze and the Energy Information Administration raised its price forecast for crude while predicting record U.S. gasoline demand.
Crude oil prices are drifting lower for the third trading session in a row after rising for the previous four weeks in a row. The market sentiment may be experiencing a change in the short term as the current fundamentals remain simply bearish. The upside momentum driven by the perception view than the market is already in a rebalancing pattern is slowing. The majority of the current bearish fundamental data hitting the media airwaves over the last week or so has pushed the perception view to the background for the near term.
WTI and Brent are now at the highest level of the year as even this week’s fundamental snapshot (basis API) was bullish. The battle of views continues with the view that the market is already in a rebalancing pattern continuing to dominate the narrative as well as the short-term direction of the market. Unless there is a more consistent pattern of bearish current fundamentals the upside rally is likely to continue.