We still see crude fundamentals as being structurally bearish on paper, but we’re cautiously optimistic about OPEC support at these levels.
WTI Crude Oil (October)
Last week’s close: Settled at 67.67, down 1.48 on Friday and 5.88 on the week
WTI is stronger this morning, with WTI up +0.69 or 1% to $68.35. RBOB futures are up +1.53% or 2.90 to 192.50, and Diesel is up +2.02 +1%.
A report released Friday afternoon by Energy Aspects stated that China is likely buying inventories for their SPR at these low price levels. The energy consulting firm estimated that these reserve purchases are likely around 16 million barrels a month, around 5% of the country’s regular crude imports.
In other news, gloomy forecasts and rhetoric have been coming out of the APPEC conference in Singapore, one of the larger oil industry conferences that started today. Trafigura’s head of oil Ben Luckock was quoted as saying that Brent is “probably going to go into the $60s some time relatively soon”, but warned on being overly bearish on potential geopolitical risks.
Chinese inflationary data was disappointing, with CPI and PPI both coming in weaker than expected overnight. CPI YoY was +0.6% [+0.7% estim] while PPI was -1.8% YoY [-1.5% estim]. Chinese PPI can be a leading indicator for Western CPI figures, and may lead to higher confidence levels for the monetary easing bets we’re seeing here in the states.
The crude complex faced a tough week last week, with WTI falling $5.88 or around -8% to close Friday at $67.67. For this coming week, we’re looking at commentary out of APPEC, OPEC production updates, news on the Libyan situation and wider inflationary sentiment here in the U.S.
Gauging the whole picture – we still see crude fundamentals as being structurally bearish on paper, but we’re cautiously optimistic about OPEC support at these levels. From a technical perspective, futures are potentially oversold at these levels as well.
WTI Crude Oil futures will find first key resistance aligning with the lows from Wednesday and Thursday. Price action must clear and close above here in order to neutralize the selling in the near-term, but repair does not begin until a close above major three-star resistance at…
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