Oil Prices Falter on Bearish Inventory Figures

Oil Prices Falter on Bearish Inventory Figures
WTI and Brent prices faltered during midweek trading.

West Texas Intermediate (WTI) and Brent crude oil prices faltered during midweek trading.

Steve Blair, senior account executive with the RCG Division of Marex Spectron, told Rigzone that petroleum markets reacted to the latest weekly oil inventory report from the American Petroleum Institute (API). As Bloomberg reported earlier Wednesday, API figures showed an increase in crude stocks of 1.22 million barrels last week at the key Cushing, Okla., storage hub.

When the U.S. Department of Energy (DOE) statistical arm subsequently released its crude inventory figures, traders realized the DOE “had basically more than confirmed” API’s numbers, Blair said.

“The (DOE’s) large 5.7 million-barrel build in crude, with 1.2 million of that at Cushing, gave the bears the ammunition needed to continue to put pressure on the price structure,” he explained. “Of particular note was the extreme weakness of heating oil and thus the crack spread, which broke down through major support levels seen on both the daily and daily continuation charts and the December crack spread could see a move down toward the $24.56 level.”

December WTI shed 48 cents to settle at $55.06 per barrel Wednesday. The light crude marker peaked at $55.73 and bottomed out at $54.42.

“WTI, after reaching a recent high at $56.92 on Tuesday, saw prices move lower on the back of the weekly petroleum reports, and a few of the near-term support levels were broken today,” said Blair, citing a daily chart for December WTI.

Brent crude for December delivery lost 98 cents, ending the midweek session at $60.61 per barrel. The right side of a daily Brent chart supplied by Blair shows an overall uptick in December Brent for the past month.

“Brent also saw a new recent high made on Tuesday at the $62.34 level before prices began to move lower in conjunction with WTI,” noted Blair. “Support seen at the $60.69 level and appears to be holding, for now. Further support at $59.88 and good support seen between that level and the $58.48 level, basis December.”

Also ending the day lower was reformulated gasoline (RBOB). The soon-to-expire November RBOB settled at $1.66 per gallon, reflecting a two-cent decline. December RBOB, meanwhile, also lost two cents and ended the day at$1.62 per gallon.

“The November contract will expire tomorrow and so we turn attention to the December contract,” said Blair. “Prices saw a new high made today at the $1.6597 level – higher than yesterday’s high – before collapsing to close below the $1.6199 support level. Further support seen on the continuation chart at $1.6111 and on the daily chart at the $1.6000 level. Below that support seen at the $1.5850 area.”

Henry Hub natural gas, whose uptick in recent days is evident at the right end of the price chart, continued its climb Wednesday. December gas futures added five cents to settle at $2.69. Blair noted that December is now the front-month gas futures contract given Tuesday’s November contract expiration.

“Natural gas, even in light of high and record production, succumbed to the cold weather,” said Blair, referencing the cold conditions moving eastward across the Lower 48 United States. “Prices have rallied from a close at the $2.460 level last Friday to the high seen today at the $2.723 level. There is some resistance seen at $2.761 and then at $2.835, which could easily be in the cards from now until the early days of November.”

To contact the author, email mveazey@rigzone.com.


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