Recap: Oil prices fell on Wednesday, with WTI settling at its lowest level in almost a month, as the dollar weakened and concern over gasoline demand overshadowed the 9.4 million barrel drop in U.S. crude oil inventories. The drop in crude oil inventories was due to a record fall in production, which dropped 1.1 million barrels per day to 9.7 million barrels per day, as most U.S. offshore facilities were shut as a precaution ahead of Hurricane Laura. October WTI fell $1.25, or 2.9%, to settle at $41.51 a barrel, the lowest level for a spot contract since August 7. November Brent shed $1.15, or 2.5%, to settle at $44.43 a barrel. Products also slipped, with October RBOB falling 1.9%, to $1.202 a gallon and October heating oil losing 3.4% to $1.1885 a gallon.
Technical Analysis: Based upon daily bar chart, October WTI blew through the 10 and 200-day moving averages, but stopped short of settling below the 50-day moving average, which is currently set at $41.24. Coming into Thursday session, we would look for an attempt for WTI to break to the downside and to settle below the 50-day moving average. If this occurs a push toward the bottom of the sideways trading pattern set at $37.54 could become a real possibility. To the upside, resistance is set at $42.59 and $43.96.
Fundamental News: The U.S. Department of Interior reported that U.S. Gulf of Mexico offshore oil output on Wednesday was down 368,223 bpd or 19.9% of the region’s daily production. It said 59 of the U.S. Gulf of Mexico’s 643 manned platforms remained evacuated, down from 71 production platforms on Tuesday. Producers also were resuming natural gas production, which was down by 532.55 million cubic feet/day or 19.7% of the region’s daily production.
Russia's Energy Ministry reported that the country’s oil and gas condensate production in August increased by 5% to 41.7 million tons or 9.86 million bpd from 9.37 million bpd in July. The increase followed a decision by the OPEC+ group of oil-producing nations to ease their curbs on output to 7.7 million bpd from 9.7 million bpd. The deal excludes its condensate production of 700,000-800,000 bpd.
Russia’s Energy Minister, Alexander Novak, said global oil demand has recovered by as much as 90% of pre-pandemic levels. He expects global oil demand to fully recover in the first half of second half of 2021 as he sees risks of a second coronavirus pandemic wave. He added that Russia wil propose OPEC+ react to a recovery in global oil demand. Russia’s Energy Minister expects Russia’s oil output to fall by 10% to 510 million tons in 2020. He said Russia’s oil output in August-December will fall about 13.8% from earlier planned levels.
Iraq’s Oil Ministry spokesman said the country remained fully committed to the OPEC+ oil supply cut agreement, denying an earlier report that it was seeking an exemption from the agreement.
IIR Energy said U.S. oil refiners are expected to shut in about 5 million bpd of capacity in the week ending September 4th, increasing available refining capacity by 85,000 bpd from the previous week. Offline capacity is expected to fall to 4 million bpd in the week to September 11th.
Early Market Call - as of 8:37 AM EDT
WTI - Oct $40.76 down 75 cents
RBOB - Oct $1.1887 down 1.33 cents
HO - Oct $1.1560 down 3.25 cents
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