Crude Oil Today - Price retraces but still looks vulnerable

Market Analysis /
Greg McKenna / 19 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


Oil was lower oernight even though the EIA reported a massive 5.8 million barrel build in inventories and a fresh record for US production. Key here was that traders found some good news in the gasoline and distillate stats. So, this morning WTI is up 1.18% at $68.91 while Brent is up 1% at $72.90.


US crude output hit 11 million bpd for the first time ever the Energy department said overnight.

That, along with with the big build in crude oil inventories would normally have been enough to see prices fall. But traders found some bullishness in the demand seen in gasoline and distillate numbers which showed falls in inventories of 3.2 million and 371,000 barrels respectively. They were both big misses to the downside relative to expectations.

So we ended up with a net bullish read on the inventory data which was supportive of prices for both WTI and Brent.

As Dennis Gartman is want to say, if a market doesn't react to bearish news - the headline Crude build - then perhps it's not a bear markets. 

I've noted that and tempered my outlook a little as you'll see below. 

But what's interesting going forward for oil, and something will really put the Iranians noses out of joint, is news that the JMMC (Joint Ministerial Monitoring Committee) is looking at compliance at a total level not country specific.

Bloomberg’s Javier Blas Tweeted overnight that, “JMMC committee is insisting #oil production is monitored as “overall” compliance with the output cut deal, rather than country individual levels (that’s going to make #Iran and Venezuela very unhappy as allows #SaudiArabia to grab market share). #OOTT”.

Indeed, that is exactly what this is.

The JMMC is effectively ignoring Iranian and Venezuelan objections and constraints in order that the Saudis and Russians ensure that enough oil gets to market to stop prices rocketing higher. It’s doesn’t necessarily mean that they’ll pump enough to drive prices sharply lower – that’s probably not their intent. But they know with all the uncertainty, to high prices might materially impact global growth and thus future demand. So they are trying to play the long game.

Price action wise though it looks like maybe Brent, and WTI, want to test higher before they fall again. This is particularly so for Brent which may wish to test the breakout of the uptrend channel.

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


On the day today the big release is Australian employment for June. The Reuters poll says the market is looking for an increase of 17,000 jobs and an unemployment rate of 5.4%. Australian data has improved a little recently. This is very important for the Aussie dollar and interest rate markets still grappling with exactly where households and consumers are at.

Retail sales in the UK will be important for forex traders and other than that it’s just jobless claims and the Philly Fed manufacturing index in the US.

Have a great day's trading.

Greg McKenna

Chief Market Strategist

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