Baker Hughes reported a drop of 1 in the number of active U.S. oil rigs

Recap: September WTI climbed back above $40, in what was a choppy trading session, as prices seesawed above and below unchanged. Oil prices were also boosted by a slump in the dollar and maintained gains after Baker Hughes reported a drop of 1 in the number of active U.S. oil rigs. WTI September 1.23% rose 35 cents, or 0.9%, to close at $40.27 a barrel, while October Brent added 27 cents, or 0.6%, to finish at $43.52 a barrel on ICE Futures Europe. WTI logged a monthly rise of around 2.6%, while Brent rose more than 5% for July. September RBOB fell 1.6% to $1.1711 a gallon, while September heating oil rose 1% to $1.224 a gallon.

Technical Analysis: And the sideways trading in WTI continues, with the September contract finishing the week above $40 a barrel. At this point, we will most likely see continued sideways trading, but if we get a push below the 50-day moving average, currently set at $39.03, we would look for a push toward the bottom of the sideways pattern set at $37.32. Below this, additional support is set at $35. To the upside, resistance is set at $40.86, the 10-day moving average and above that at $41.74.

Fundamental News: The EIA reported that U.S. crude oil production fell in May, falling a record 2 million bpd to 10 million bpd.  According to the EIA, U.S. total oil demand in May fell by 20.5% or 4.156 million bpd on the year to 16.103 million bpd.  It reported that gasoline demand in May fell by 23.5% or 2.213 million bpd on the year to 7.188 million bpd, while its distillate demand fell by 12.6% or 508,000 bpd to 3.533 million bpd. U.S. crude oil production in May fell by 1.989 million bpd to 10.001 million bpd.  The EIA also reported that U.S. crude oil exports fell to 2.929 million bpd in May from 3.077 million bpd in April.   Total refined oil product exports fell to 1.805 million bpd in May from 2.738 million bpd in April.

Baker Hughes reported that the number of rigs drilling for oil in the US fell by 1 to 180 in the week ending July 31st. 

Exxon’s Senior Vice President, Neil Chapmann said the oil industry likely saw the trough for prices in April. He stated that retail sales show the bottom of demand followed by encouraging signs of a recovery. 

Pemex's trading arm is overhauling its fuel importing practices, which includes shifting to swapping crude oil with major partners in exchange for gasoline and other fuels to save cash. 

According to Reuters, OPEC’s oil output increased by over 1 million bpd in July as Saudi Arabia and other Gulf members ended their voluntary extra supply curbs on top of an OPEC-led deal, and other members made limited progress on compliance.  The 13-member Organization of the Petroleum Exporting Countries produced 23.32 million bpd on average in June, up 970,000 bpd from June's revised figure, which was the lowest since 1991.  In July, OPEC delivered 5.743 million bpd of the pledged reduction, equal to 94% compliance.  Compliance in June was revised up to 111%.  The largest increase in supply in July came from Saudi Arabia, which produced 8.4 million bpd, up 850,000 bpd from June and close to its quota. 

IIR Energy reported that U.S. oil refiners are expected to shut in 4 million bpd of capacity in the week ending July 31st, decreasing available refining capacity by 74,000 bpd from the previous week. 

Early Market Call – as of 9:45 AM EDT

WTI – Sep $40.27 down 2 cents

RBOB – Aug $1.1862 up 1.61

HO – Aug $1.2323 up 0.82

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