The Oil Market on Thursday Continued Higher in its Upward Trend Channel on Concerns of Tighter Supply

Market Insights
Heating Oil
September 15, 2023

Recap:  The oil market on Thursday continued higher in its upward trend channel on concerns of tighter supply. The market retraced some of Wednesday’s losses but remained range bound as it held resistance at its previous high. However, the market breached that level and rallied higher amid the IEA statement on Wednesday that pointed to a 2023 supply deficit if Saudi Arabia and Russia’s output cuts are maintained. The crude market breached the $90 level and rallied to a high of $90.50 ahead of the close. The October WTI contract settled up $1.64 at $90.16, the first time the market has settled above the $90 level this year and the highest settlement since November 7, 2022. The November Brent contract settled up $1.82 at $93.70. The product markets also ended in positive territory, with the heating oil market settling up 4.61 cents at $3.4815 and the RB market settling up 43 points at $2.7427.

Technical Analysis:  The oil market is still seen trending higher as the market’s concern over supply tightness continues to outweigh concerns over weak economic growth. Technically, the stochastics, which are in overbought territory are still trending sideways. The market is seen finding resistance at its high of $90.50 and $92.47, while support is seen at its low of $88.68, $88.29, $87.22, $86.71 and $86.39.

Fundamental News:   The Organization of the Petroleum Exporting Countries said data-based forecasts do not support the International Energy Agency's projection that demand for fossil fuels would peak in 2030. On Tuesday, IEA Executive Director Fatih Birol said in an op-ed in the Financial Times that new IEA estimates show "this age of seemingly relentless growth is set to come to an end this decade, bringing with it significant implications for the global energy sector and the fight against climate change." OPEC, in its statement on Thursday said what made the projections "so dangerous" is they are often accompanied by calls to stop new oil and gas investments. OPEC Secretary General Haitham Al Ghais said "Such narratives only set the global energy system up to fail spectacularly." OPEC said the projections do not factor ongoing technological progress by the oil and gas industry to cut emissions and that 80% of the world's energy mix comes from fossil fuels, the same as three decades ago.  

Kuwait's Oil Minister, Saad Al Barrak, said members of OPEC have acted in "harmony" at various stages throughout the group's history, which has ensured the group's success. He said OPEC members have focused on the stability of the oil markets.

Kpler shipping data showed that total gasoline fixtures from Northwest Europe to the U.S. Atlantic Coast for the week ending September 8th reached 357,000 mt, a two month high and up from a four week prior average of 243,000 mt shipped.

S&P Global Commodities at Sea estimated shipments of diesel and gasoil from the Middle East to Europe averaged 420,000 b/d in August, up from 353,000 b/d shipped in July. S&P Global Commodity Insights is estimating these shipment will grow to 598,000 b/d in the fourth quarter, as Europe’s net deficit in middle distillates grow, especially with refinery maintenance in Europe expected to peak in October.

Demand for Iranian crude is increasing in China after the extension of supply cuts by Saudi Arabia and Russia increased global prices, while Tehran is increasing its output and exports despite U.S. sanctions.

U.S. producer prices increased by the most in more than a year in August as the cost of gasoline increased. The Labor Department said the Producer Price Index for final demand increased 0.7% in August, the largest gain since June 2022. Data for July was revised slightly up to show the PPI advancing 0.4% instead of the previously reported 0.3%. In the 12 months through August, the PPI gained 1.6% after increasing 0.8% in July.

Early Market Call - as of 9:53 AM EDT

WTI - October $89.77 down 39 cents

RBOB - October $2.6897 down 5.3 cents

HO - October $3.3801 down 10.14 cents

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