Recap: The oil market on Friday posted an outside trading day as the market weighed concerns over an oversupply against renewed concerns over Russian crude supplies. The market remained pressured early Friday after the IEA on Thursday said the global oil supply would increase more rapidly than previously expected this year due to the OPEC+ output increase. The crude market sold off to a low of $61.69 in overnight trading before it retraced some of its losses. The market was supported by news of a drone attack on Russia’s northwestern port of Primorsk, which led to a suspension of oil loading operations overnight. The market was further supported by the Kremlin stating that there was a pause in peace negotiations between Russia and Ukraine. The lack of progress in peace negotiations could trigger further sanctions against Russia and potentially overshadow the underlying oversupply outlook. The oil market rallied to a high of $63.98 by mid-morning before it erased some of its gains in afternoon trading. The October WTI contract settled up 32 cents at $62.69 and the November Brent contract settled up 62 cents at $66.99. The product markets ended the session higher, with the heating oil market settling up 81 points at $2.29 and the RB market settling up 61 points at $1.9854.
Technical Analysis: The crude market will retain its sideways trading range as it weighs increasing surplus risks against geopolitical uncertainty and the possibility of further sanctions on Russia. The market is seen finding support at $61.69, $61.45 and $61.29. Meanwhile, resistance is seen at $63.98, $64.08, $64.28 and $65.09.
Fundamental News: U.S. Energy Secretary, Chris Wright, said the European Union could phase out Russian oil and gas faster, adding that it would be helpful in ending the war in Ukraine.
The Kremlin said that there was a pause in peace negotiations between Russia and Ukraine and accused European countries of hindering a process it said that Moscow remained open to. Baker Hughes reported that U.S. energy firms this week added oil and natural gas rigs for a second consecutive week for the first time since April. The oil and gas rig count increased by two to 539 in the week ending September 12th. Baker Hughes said oil rigs increased by two to 416 this week, their highest since July, while gas rigs held steady at 118.
A drone attack on Russia’s northwestern port of Primorsk set fire to a vessel and a pumping station on Friday, the first reported drone strike on one of the country’s largest oil and fuel export terminals. Governor Alexander Drozdenko said the fire on the vessel at Primorsk was extinguished and there was no risk of an oil product spill. He said more than 30 drones were destroyed over the region.
IIR Energy said U.S. oil refiners are expected to shut in about 585,000 bpd of capacity in the week ending September 12th, cutting available refining capacity by 154,000 bpd. It reported that offline capacity is expected to increase to 702,000 bpd in the week ending September 19th and to 1,036,000 in the week ending September 26th.
Valero Energy Corp is overhauling a fluidic catalytic cracking unit at its 180,000 bpd Memphis, Tennessee refinery. The 65,000 bpd fluidic catalytic cracking unit was shut over the weekend along with a 12,000 bpd alkylation unit for the overhaul. The overhaul is scheduled to finish by November 1st. The refinery’s flare gas recovery unit was also shut for work and a hydrotreater was taken out of production for a catalyst change.
Early Market Call – as of 8:35 AM EDT
WTI – Oct $62.91, up 30 cents
RBOB – Oct $1.9960, up 98 points
HO – Oct $2.3178, up 2.65 cents
