Recap: The oil market gapped lower on the opening and remained pressured on Monday following weaker than expected Chinese economic growth and a partial restart of Libyan output. The market gapped lower from $75.11 to $75.02, which it quickly backfilled but remained under pressure with China reporting that its GDP grew 6.3% on the year in the second quarter as its post-pandemic recovery lost momentum. The market briefly rallied to a high of $76.09 following a Reuters news alert on Saudi Arabia extending a voluntary output cut. However, the market quickly fell as Reuters recalled the headline, because it was repeated news originally published on June 4th. The market sold off to a low of $73.84 before it retraced some of its losses during the remainder of the session. The August WTI contract settled down $1.27 at $74.15 and the September Brent contract settled down $1.37 at $78.50. The product markets ended the session lower with the heating oil market settling down 3.37 cents at $2.5642 and the RB market settling down 1.2 cents at $2.6317.
Technical Analysis: The crude oil market on Tuesday will likely trade sideways as it awaits the release of the weekly petroleum stocks report. The market is expecting to see draws in crude and product stocks, with a draw of over 2 million barrels in crude stocks. The market is seen finding support at its low of $73.84, followed by $73.40, $72.98, $72.67, $72.19, $71.19 and $70.98. Meanwhile, resistance is seen at $75.15, $76.09, $77.30-$77.33 followed by $78.52-$78.62, the $80.00 level and $80.39.
Fundamental News: The EIA reported that U.S. shale production is set to fall to nearly 9.4 million bpd in August, which would be the first monthly decline since December 2022. Output from the Permian Basin is set to fall to 5.76 million bpd in August, the lowest level since April while output from the Bakken region is set to increase to 1.22 million bpd in August, the highest level since November 2020 and output from the Eagle Ford region is set to fall to 1.12 million bpd in August, the lowest level since February.
Production at Libya’s Sharara and El Feel oilfields, which were shut on Thursday following the abduction of a former finance minister, has resumed on Saturday evening. Sharara partially resumed its output at 30,000 bpd out of its usual 290,000 bpd. Production was returning to normal on Sunday morning.
According to the International Energy Forum, citing data from the Joint Organizations Data Initiative, Saudi Arabia's crude oil production in May fell by 502,000 bpd to 9.96 million bpd in May. The country’s crude oil exports in May fell 5.3% to a 19-month low of 6.93 million bpd from 7.32 million bpd in April. Saudi Arabia’s crude oil inventories fell by 1.2 million barrels and its product inventories increased by 900,000 barrels in May. The country’s domestic refineries processed 100,000 bpd less crude t 2.59 million bpd, while direct crude burn increased by 89,000 bpd in May to 478,000 bpd.
The Kommersant newspaper reported that Russia is on track towards fulfilling its plan to cut oil exports in August by 500,000 bpd. The newspaper said Russia's oil exports by sea may fall to 2.9-3 million bpd in August, mainly due to export cuts at Russia's Baltic ports. The cuts were made by adjusting the third quarter export schedule of state-owned pipeline operator Transneft. Earlier this month, Russia announced the plan as it looked to support global oil prices in concert with Saudi Arabia.
Russia’s Energy Ministry said Russia will reduce its oil exports by 2.1 million tons in the third quarter in line with planned voluntary export cuts of 500,000 bpd in August. The reduction will affect supplies to Western ports of Primorsk, Ust-Luga and Novorossiisk, as well as shipments via pipelines.
IIR Energy said U.S. oil refiners are expected to shut in about 442,000 bpd of capacity in the week ending July 21st, increasing available refining capacity by 52,000 bpd. Offline capacity is expected to fall to 155,000 bpd in the week ending July 28th.
Early Market Call - as of 9:40 AM EDT
WTI - August $74.85, up 70 cents
RBOB - August $2.6782, up 4.62 cents
HO - August $2.5895, up 2.53 cents
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