The U.S.-Mexico trade deal is expected to prop up demand for oil

Recap: Oil prices slipped on Tuesday, stemming a two-day ascent, as traders turned toward profit taking ahead of this week’s inventory reports. The downward move was kept at bay by the weakness in the dollar and by the U.S-Mexico trade deal, which is expected to prop up demand for oil. October WTI experienced an outside trading session, as it achieved a higher high and a lower low than that of the previous session. This spot contract settled at $68.53 a barrel, down 34 cents, or 0.49%. Meanwhile, October Brent posted a fresh high, but held above yesterday’s low, before settling at $75.95 a barrel, down 26 cents, or 0.34%.

September RBOB fell 0.5% to settle at $2.079 a gallon. September heating oil slipped 0.2% to settle at $2.211 a gallon.

Fundamental News: Bloomberg reported that crude oil stocks held in Cushing, Oklahoma are expected to increase by 50,000 bpd to 24.213 million barrels in the week ending August 24th. 

Iran’s crude oil and condensate exports in August are expected to fall below 70 million barrels for the first time since April 2017.  The US has asked buyers of Iranian crude to cut imports to zero starting in November to force Iran to negotiate a new nuclear agreement and to curb its influence in the Middle East.  The total volume of crude and condensate to load in Iran this month is estimated at 64 million barrels, or 2.06 million bpd compared with a peak of 92.8 million barrels or 3.09 million bpd in April. 

An adviser at Saudi Arabia’s Energy Ministry, Ibrahim al-Muhanna, said current US sanctions on Iran are unlikely to stop Iranian oil exports completely.  He stated that Iran would be unable to close the Straits of Hormuz and Bab al-Mandab even partially.  He said Iran would be the first to lose out on a move to block those major shipping routes and that any such action would trigger further sanctions on Iran.  He added that if Iran closes the Strait of Hormuz, the UN Security Council would likely authorize military action.   

Japan’s Trade and Industry Minister, Hiroshige Seko, said Japanese oil refiners should judge whether to import Iranian crude.  Japan’s government has been pushing to maintain Iranian oil imports during talks with the US.  Japanese refiners will likely stop loading Iranian crude by mid-September with final shipments arriving in the first half of October.

The Unite union said industrial action on Total’s North Sea oil platforms on September 3rd will be suspended.  It said the suspension is a gesture of goodwill to provide a more constructive and positive environment for discussions with the company. 

Russia’s Energy Minister, Alexander Novak, said the country’s August crude and condensate output is expected to be flat month on month, signaling a stall in production.  In July, Russia produced 47.44 million metric tons or 11.218 million bpd, up 1.4% on the month. 

Venezuela’s main oil port of Jose is partially operating following a weekend tanker collision that halted one of its three docks, cutting PDVSA’s ability to export upgraded crude and receive imported diluents.  Crude exports from Jose were running earlier this year at about 900,000 bpd. 

A fire broke out on Tuesday morning on a roof seal of a Plains All American Pipeline crude storage tank east of Wichita Falls, Texas.  The fire was limited to a single storage tank at its facility.  Wichita Falls is a crude injection point in north Texas along Plain’s Basin Pipeline, which runs from the Permian Basin to the oil storage hub at Cushing, Oklahoma.  Crude was flowing at a rate of nearly 409,000 bpd when the Basin pipeline was shut after decreased power consumption was observed on Tuesday morning. 

Early Market Call - as of 8:20 AM EDT

WTI - Sep $68.99, up 45 cents 

RBOB - Sep $2.0833, up 36 points

HO - Sep $2.2247, up 1.36 cents