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Oil sinks but natural gas jumps for the second day

  
Analysis, Crude

Oil under pressure

Oil is lower for the second day after Genscape reported that inventories at Cushing rose last week. API data is due late today and EIA data tomorrow.
There is talk about swelling inventories globally along with modest demand growth. Along with that comes with speculation that OPEC may need to cut production further in December. That’s a longshot. Instead, OPEC may try to squeeze a few of the members that are overproducing into complying with quotas.
Technically, the rally in oil stalled right around the 50% retracement of the Saudi spike.
Oil under pressure
Meanwhile, forecasts for colder weather in the US continue to boost natural gas prices. The front month surged yesterday and is up another 4.5% today.
I highlighted an inverted head-and-shoulders pattern yesterday with a target of $2.60. We’re almost there.

Natural gas

Russia’s Novak: No official proposals from OPEC+ members to change deal

  
Analysis, Crude

Comments by Russian energy minister, Alexander Novak

Oil
  • Says all OPEC+ members need to comply with the current deal in full
Yesterday, we saw headlines of potential deeper output cuts by OPEC and that helped to give oil prices a lift in overnight trading.
As much as I want to be optimistic about that, I’d reserve judgment as it is still early days before we get to the next OPEC+ meeting in December.
Then, there is the issue of compliance as Novak noted above as well. Deeper cuts are pointless if they cannot get every contributing nation on board with 100% compliance.

Oil rallies to the highs of the week

  
Analysis, Crude
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WTI crude at the best levels since Friday

WTI crude at the best levels since Friday
There was a huge build in US oil supplies in data released today but the market has shaken it off. That’s a great sign for the bulls and it comes — in part — due to draws in products.
I think this could lead to some short-term upside but WTI needs to get above $56 to really make any headway.

US weekly EIA energy inventories +9281K vs +3000K expected

  
Analysis, Crude
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Weekly US oil inventory data from the EIA:

  • Prior was +2927K
  • Gasoline -2562K vs -1500K exp
  • Distillates -3823K vs -2500K exp
  • Cushing +1276K
  • Refinery utilization -2.6%
The headlines aren’t as bad as they look because the API numbers from late yesterday were so bearish. The drop in refinery runs and draws in products takes the sting out of the report:
  • Crude +10500K
  • Cushing +1600K
  • Gasoline -934K
  • Distillates -2900K

OPEC’s Barkindo: Demand is what drives the oil market, not supply

  
Analysis, Crude

Comments by OPEC secretary general, Mohammed Barkindo

  • Volatility, geopolitical tensions hurt oil market
  • Cautious in projecting demand for 2019, 2020
  • Says that producers are committed to maintain stability beyond 2020
Yeah, I don’t think that’s how it works. In an efficient market, the dynamics of supply and demand are what drives prices to where they are.
So, it is either he is saying that the market is manipulated or he doesn’t understand the proper dynamics of a functioning market.
Questionable

EIA cuts world oil demand growth by 100K BPD

  
Analysis, Crude
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Cuts 2019 will demand growth by 50 K

The EIA is out with world /US oil demand and production forecasts
  • cuts forecast for 2020 world oil demand growth by 100 K BPD,.
  • Sees 1.3 million BPD increase in 2020
  • cuts forecast for 2019 world oil demand growth by 50 K BPD.
  • Sees 0.84 million BPD year on year increase
  • projects US crude output to rise 1.27 million BPD to 12.26M BPD in 2019 (versus 1.25M BPD increasing forecast last month)
  • sees US crude output to rise 910K BPD to 13.17M BPD in 2020 (vs rise to13.23M BPD forecast last month)
  • US petroleum and other liquid fuel demands to rise 40K BPD to 20.54M BPD in 2019 (vs 140K BPD increase forecast last month)
  • US petroleum and other liquid fuels demand to rise 220K BPD to 20.76 M BPD in 2020 (versus increase to 20.85M BPD forecast last month).
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