Oil Prices Mixed for the Week

Oil Prices Mixed for the Week
WTI and Brent crude futures declined Friday, but the Brent managed to show a slight week-on-week increase.

West Texas Intermediate (WTI) and Brent crude futures declined Friday, but the latter benchmark nevertheless showed a slight week-on-week increase.

The October WTI contract price lost $1.18 Friday to settle at $54.17 per barrel. It peaked at $55.60 and bottomed out at $53.24 during the late-week session. Compared to the August 16 close, the WTI is down 1.3 percent.

Brent crude oil for October delivery posted a more modest decline Friday, falling 58 cents to end the day at $59.34 per barrel. Week-on-week, the Brent is up 1.2 percent.

“Same old song, new verse,” commented Tom Seng, Assistant Professor of Energy Business at the University of Tulsa’s Collins College of Business. “After higher prices Monday fueled by optimism about the U.S./China trade war, oil prices traded in a fairly tight range this week until today.”

Both the WTI and Brent declined amid an escalation the bilateral trade dispute, with China unveiling new tariffs to be imposed on copper and crude oil imports, Seng explained. He added that the crude tariff announcement applied more downward pressure on crude in an oil market already facing concerns about global demand growth.

“The ‘tit-for-tat’ tariff impositions by the U.S. and China have turned the global economy on its head with the U.S. stock market getting thumped today after a ripple effect of this latest announcement moved across the globe overnight,” said Seng.

Seng also noted this week’s economic woes trumped a bullish U.S. Energy Information Administration (EIA) crude inventory report and a weaker U.S. dollar, staving off a rally. He pointed out the latest EIA Weekly Petroleum Status Report showed:

  • A 2.7 million-barrel (Bbl) decline in commercial crude stocks – far higher than Wall Street Journal analysts’ forecast of a 1.5 million-Bbl draw but lower than the 3.5 million-Bbl draw reported Tuesday by the American Petroleum Institute
  • A total of 438 million Bbl of crude in storage – two percent above the five-year average for this time of year
  • 42 million Bbl of crude in storage at the Cushing, Okla., hub, reflecting 55 percent of capacity there and a 2.5 million-Bbl week-on-weed decline
  • A 1.1-percent increase in refinery utilization to 17.7 million Bbl per day (bpd), or 95.9 percent, that contributed to a drawdown in stocks
  • An 11-percent year-on-year decrease in crude imports
  • Steady U.S. oil production at 12.3 million bpd for another week            

“The start-up of two new pipelines bringing more oil from the Permian Basin is expected to increase flow from that area by as much as 1.5 to 2 million bpd over the next 18 months,” said Seng. “This additional supply is destined for export terminals at a time when the WTI/Brent spread was down to about $3 last week but has risen to about $5 this week. The tighter spread has caused export volumes to fall from about 3 million bpd from May through mid-July to 2.4 million bpd during the ensuing three weeks.”

On a more bullish front for crude, Seng noted that Venezuela faces the shutdown of approximately one-half of its oil rigs in October should the Trump administration not extend the 90-day sanctions waivers it granted to U.S. service companies operating and maintaining the rigs.

“The October WTI NYMEX futures contract became the ‘prompt’ month this week and was trading right around its five-, 10- and 20-day moving averages until today,” Seng said. “With current prices below all three moving averages, look for some buying ‘retracement’ on Monday. The contract is in a slightly oversold condition according to momentum indicators. Today’s volume is strong at well over 700,000 contracts.”

Reformulated gasoline (RBOB) also declined Friday. September RBOB lost 2.5 cents to settle at $1.64 per gallon. For the week, RBOB is down 1.2 percent.

“U.S. inventories of total gasoline are at 234 million, right at year-ago levels but at the high end of the five-year average for this time of year,” said Seng. “Average U.S. retail prices are 22 cents per gallon lower than last year while NYMEX futures prices are about 32 cents per gallon less. Both production and demand were up last week.”

September Henry Hub natural gas futures edged downward Friday, declining less than one cent to settle at $2.15. Compared to the week-ago close, natural gas is down 2.3 percent.

“September natural gas NYMEX futures prices can’t seem to catch a break,” Seng remarked. “Early week prices rose on the hot August weather and resultant gas-fired generation demand. But, a storage report that was right on forecasts and today’s across-the-board fallout will leave natgas down on the week – the fifth lower week out of the past six. Forecasts for a cooler early September only added to the bearish sentiment.”


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