Crude Oil Today - Breaking lower

Market Analysis /
Greg McKenna / 18 Jul 2018

Welcome to Crude Oil Today, my brief look at what's happening in oil markets and what it might mean for prices. 

As ever, feedback welcome

QUICK SUMMARY

Oil recovered from early lows on more concerns about supply out of Venezuela and Libya where, respectively, production facilities are being shuttered for maintenance and another force majeure at a port was declared. WTI is flat at $68.05 while Brent was up 0.1% to $72.00. That was the story till the API data anyway. Both Brent and WTI are lower now, down 0.4% and 0.7% respectively. 

BIGGER PICTURE

Oil has had some big falls. But every time it drops recently there seems to be some sort of supply disruption news that puts the bid back in the market.

That’s what we saw again overnight with the news that more than half a million barrels a day of production was about to be shuttered for maintenance in Venezuela. We also heard another force majeure at a Libyan port to disrupt supplies. That helped crude bounce from the lows which were a continuation of the previous days weakness.

But now that Brent has broken both the uptrend from last year in the mid $40 region and the recent consolidation range there is a reasonable chance that sentiment is shifting. That's important given the still elevated level of speculative longs in the market. 

The WTI chart is less compelling than Brent - but still pointing lower nonetheless. 

Anyway, last night's bounce ran into trouble when the API inventory data for the US was released. After a draw last week - and the massive EIA reported draw - API said that inventories were 629,000 higher in the last week. 

As a result where WTI was flat on settlement is now down 0.5% at $67.76 and where Brent was up 0.1% it is down 0.4% now at $71.58. That is right back near the break out level which drove it up to ~$80.50. Should $71 break then a big fall could be in the offing. My target for both is lower and for Brent is the mid $66 region.

Click on me, I'll expand
Click on me, I'll expand

DATA:

12am my time - roughly 10am New York - is going to be big with the release of EIA data for the week ending July 13. I've got competing guesstimates on what the market is expecting but it seems to be 100,000 barrels either side of a 3.5 million draw for Crude. Don't forget though it's how this data fits with the other EIA releases that has become increasingly important for the overall response of the market each week. 

On other markets, it’s a quiet day in Asia for data with the Westpac Leading index for Australia the only release of note. Tonight though UK inflation data – RPI, PPI, and CPI – are out along with Euro area CPI. They could move the needle on forex rates.  Tonight Powell is back on Capitol Hill giving his second round of testimony and we also get housing starts and building approvals along with the Beige Book. That might be interesting at 4am tomorrow morning.

Have a great day's trading.

Greg McKenna

Chief Market Strategist

gregmckenna.com.au

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