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Oil climbs back above $40

Impressive rebound

The oil news flow this week has been relentlessly bearish. The EIA and OPEC reports both highlighted disappointing demand and a tip back into oversupply. There was also the BP outlook that was widely mischaracterized as predicting a peak in demand.
None of that matters today as risk trades pick up on hopes of low rates forever, more US government stimulus and a vaccine in April.
The November oil contract is up $1.54 to $40.09.

OPEC+ compliance said to improve to 103% in August, but overall output actually increased

Energy Intelligence reports on the matter

According to their assessment, OPEC+ compliance picked up from 96% in July to 103% in August but the figure may be a bit misleading because the targeted output cuts were actually scaled back by 1.9 mil bpd in August as per the April agreement.
As such, OPEC+ overall output actually rose by 1.3 mil bpd in August. The full report can be found here.
Amid the recent slump in oil prices, it prompts further questions of whether OPEC+ will be making additional output cuts as there are still question marks surrounding demand conditions and the impact of the virus outbreak towards the global economy.

Reasons for the sliding oil price pile up

  • Crude oil prices collapsed, with Brent crude closing under USD40/bbl for the first time since June
  • risk-off tone across markets 
  • stronger USD headwinds
  • tone was set earlier this week after Saudi Aramco cut its prices to Asian refiners, suggesting demand is weak
  • Bloomberg survey showed that only four out of ten Asian refiners would be subsequently trying to buy more Saudi crude
  • Abu Dhabi National Oil Co also cut its prices on Tuesday
  • US refiners are also cutting output, as the summer driving season ends and inventories remain high
  • rising COVID-19 infections across the globe doesn’t bode well for demand in the short term
  • futures markets widening in the contango for both Brent and WTI to their widest levels since May

US crude oil inventories -4.689M vs. -2.587M estimate

DOE crude inventory data for the current week of August 21, 2020

  • WTI crude oil futures traded at $43.59 just before the release
  • crude oil inventories -4.689M vs. -2.587M estimate
  • gasoline inventories -4.583M vs -1.750M estimate
  • distillates +1.388M vs -0.050M estimate
  • Cushing -0.279M vs -0.607M last week
  • crude oil implied demand 17386 vs. 16663 last week
  • gasoline demand 9780.4 vs. 9437.9 last week
  • distillates demand 5052.7 vs. 4768.3 last week
The private data released new the close yesterday showed crude inventories -4.524M and gasoline -6.392M. The crude oil data was close to the API data.
The price of crude oil is currently trading at $43.62. That is only $0.03 higher than the pre-release levels. The high price reached $43.78 today while the low price stalled at $43. Technically, the price has moved further above its 200 day moving average at $43.25. Yesterday that moving average was broken for the 1st time since February 20. Staying above the moving average would be more bullish.
Below are the private data from the API released near the close of day yesterday
API data

Oil climbs to post-pandemic high as Laura intensifies

WTI crude breaks the August high

WTI crude breaks the August high
WTI crude closed yesterday at a post-pandemic closing high but today it has also broken the intraday high. Crude was near a session low until the latest weather observations showed Hurricane Laura as a Category 3 storm and likely to intensify further. It’s headed for the heart of US offshore oil production and refining.
I’m skeptical of a storm-inspired breakout in oil because it’s not a fundamental change in the market. The chart to watch is Brent, as it also flirts with the August high and the 200-dma.
Brent
The next major update for Laura will be at 11 am ET. It’s expected to make landfall late tonight or early tomorrow.