Oil Prices Continue Slide
West Texas Intermediate (WTI) and Brent crude futures extended their recent losing streak Wednesday, weakened in part by the oil market’s renewed emphasis on a nebulous demand structure.
Steve Blair, senior account executive with the RCG Division of Marex Spectron, told Rigzone that petroleum markets have been susceptible to several factors in recent weeks.
“First, the huge price spike from the attacks on the Saudi facilities and then the price structure retreating as time went by on reports that production was returning and that the Saudis would do whatever it takes to make sure that clients were kept whole,” Blair said. “The marketplace returned to its focus on the demand structure, or lack thereof, and the situation on U.S.-China trade talks.”
Blair pointed out another factor was the American Petroleum Institute’s report Tuesday that U.S. crude inventories are up 5.9 million barrels – considered a large build.
“Yet, the U.S. Department of Energy (DOE) today showed a 3.1 million-barrel build and refinery run rates showed a 3.4-percent decline to 86.4 percent, all helping to push prices lower along with the sharp declines in global equity markets, which began yesterday due to very weak PMI (Purchasing Managers’ Index) reports out of Europe and then out of the U.S.,” Blair said.
The WTI for November delivery lost 98 cents during midweek trading, settling at $52.64 per barrel. It peaked at $54.42 and bottomed out at $52.17.
“WTI prices have not only returned to the congestion ranges that they had been in prior to the attacks and the Saudi facilities but have now pushed even lower on the back of the bearish DOE report this morning,” said Blair. “Prices now down at levels not seen since early August and support levels seen near the $51.25 level and below at $50.10. Prices have also, this week, broken down below the uptrend support line seen on the daily continuation chart.”
December Brent settled at $57.69 per barrel Wednesday, reflecting a $1.20 loss.
“Brent prices, like WTI, have fallen very quickly from the Saudi highs,” Blair observed. “However, unlike WTI, prices have not yet broken down below the congestion range seen on the daily chart for December but do not have much further to go before that occurs. Support can be seen around the $56 level.”
Reformulated gasoline (RBOB) also ended the day lower. The November RBOB contract shed three cents to settle at just under $1.55 per gallon.
“Gasoline prices, like WTI and Brent, have fallen precipitously but there is still quite a bit of technical support a bit lower around the $1.5185 and $1.5105 levels, although prices could continue through those areas before finding enough support to stem the tide,” said Blair, referencing the daily November RBOB chart. “More macro support seen on the weekly chart at the $1.4850 level.”
Henry Hub natural gas declined as well, with November gas futures falling four cents to close at $2.25.
“As quickly as natural gas rallied to near-term highs … prices have fallen right back to where they started back in early September,” commented Blair. “Support levels seen around $2.240 to the $2.177 levels (on the daily chart for natural gas), which should hold.”
Looking ahead to this Friday, Blair noted it will be “interesting to see” whether the U.S. Commodity Futures Trading Commission in its weekly report will show “that the managed money sector, after a spate of short covering during the rally, took advantage and reinstituted short positions again.”
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