The oil markets overnight and this morning were supported by bullish inventory reports

Recap: The oil markets overnight and this morning were supported by bullish inventory reports first released by API and then by the EIA. But as it appeared the bullish move was running out of steam at midday the oil markets suddenly shot up over a dollar a barrel only to quickly erase those gains as it appeared the price spike was driven by a rumored 13,000+ lot market order. By the close of business, prices while settling higher were still below levels recorded not only after the EIA report but Tuesday’s late afternoon API inventory report.

Technical Analysis: Given today’s price action we remain comfortable in staying with our overall negative outlook for prices. One should note that the 9 day stochastics for heating oil have turned lowed with crude and gasoline on the verge of rolling over and signaling a downward trend shortly. We would continue to look for $1.1000 level as an initial downside target. With the recent decline in gasoline inventories coupled with the recent rebound in demand an exception to our negative price outlook would be in the RBOB crack. We would look to be a buyer of the November RBOB/WTI crack on any move back towards today’s low at $8.22 with an initial upside target of $9.50 per barrel.

Fundamental News: S&P Global Platts Analytics estimates Libyan crude supply to the market to reach 365,000 b/d by December from September levels of 125,000 b/d. Most of these gains will come from western onshore oil fields. Platts though does not see exports from eastern oilfields in the country coming to the market until April 2021.

Platts cFlow data is showing that US Gulf Coast middle distillate exports to Europe in September will reach 640,000 mt with 70,000 mt already booked for October. Commodity data company Kpler is reporting middle distillate stocks in floating storage in Europe as of September 7th stood at 630,000 mt but by September 21st had grown to 960,000 mt.

IIR Energy reported that U.S. oil refiners are expected to shut in 4.7 million bpd of capacity in the week ending September 25th, increasing available refining capacity by 400,000 bpd from the previous week.  Offline capacity is expected to fall to 4 million bpd in the week to October 2nd.

Platts reported that two-thirds of U.S. oil and natural gas executives surveyed by the Federal Reserve Bank of Dallas in September believe U.S. oil production has peaked. Also, 74% of them expect OPEC to play a bigger role in determining oil prices ahead. Executives expect WTI oil prices to reach an average of $43.27/barrel by the end of 2020, up from $42.11/barrel in the second quarter survey, and Henry Hub gas prices to be $2.55/mmbtu by year’s end, up from $2.15/mmbtu predicted in the second quarter. The Dallas Fed’s second quarter oil production index recovered 47.2 points from the second quarter to minus 15.4 and its natural gas production index increased 37.7 points to minus 10.1.  The oil and natural gas executives also stated that WTI would need to reach $51-$55/barrel before the rig count started to increase substantially. About 29% said that would only happen at $56-$60/barrel and 18% believed prices need to increase over $60/barrel. To prompt a sharp increase in well completions, about 36% of respondents said WTI prices would need to increase to $46-$50/barrel, with 28% saying $51-$55/barrel and 18% saying $56-$60/barrel.

Early Market Call - as of 8:50 AM EDT

WTI - Nov $39.61, down 33 cents

RBOB - Oct $1.1690, down 1.23 cents