Oil market closed slightly higher as Saudi Arabia continues to restore oil operations

Recap:  On Thursday, the oil market rallied higher but ended the session relatively unchanged as the market attempts to gauge when Saudi Arabia’s oil operations will return to normal following the weekend attacks on the country’s oil infrastructure.  The market was well supported for much to the session amid reports that Saudi Arabia contacted foreign producers to help fill holes in its supply chain. The Wall Street Journal reported Saudi Arabia had asked Iraq’s SOMO for as much as 20 million barrels of crude.  However, the market gave up its earlier gains as Iraq’s SOMO denied that Saudi Arabia had requested crude supplies for its refineries.  Also, reports of storm disruptions to refining activity in Texas due to Tropical Storm Imelda suggests a decline in crude demand, prompting prices to fall from its highs.  The crude market traded mostly sideways in overnight trading before it rallied to a high of $59.54 in morning trading.  However, the market erased its gains and traded to a low of $58.01 ahead of the close.  The October WTI contract settled up 2 cents at $58.13, while the Brent contract settled up 80 cents at $64.40.  Meanwhile, the product markets ended higher, with the heating oil market settling up 3.16 cents at $2.0049 and the RBOB market settling up 4.3 cents at $1.7007.      

Technical Analysis: The crude market will remain supported ahead of the weekend amid the uncertainty that remains in the market.  The oil market is seen finding support at its low of $58.01, followed by $57.59, the 10-day moving average and $55.68, where it would backfill its gap.  Meanwhile, resistance is seen at its high of $59.54 followed by $59.85, $60.53 and $61.20.  

Fundamental News:  Genscape reported that crude oil stocks held in Cushing, Oklahoma in the week ending Tuesday, September 17th fell by 47,278 barrels on the week and by 1,174,549 barrels from Friday, September 13th to 41,177,034 barrels. 

Traders and analysts said Saudi Arabia’s ability to avert a global oil supply crunch will only become clear in a few weeks, because for now its crude held in storage can fill the gap and mask the scale of damage to its facilities.  Saudi Arabia said production will return to normal in two to three weeks, which means restoring output to about 10 million bpd.  While it carries out repairs, Saudi Arabia has promised to keep the physical crude market supplied from its inventories held in the country and abroad, estimated to have been about 180 million barrels in July.  However, traders and analysts are skeptical repairs to the Abqaiq and Khurais sites will be swift, while the lack of transparency about Saudi Arabia’s inventories added to uncertainty about whether the country can keep markets supplied without disruption. 

Russia’s Energy Minister, Alexander Novak, said he spoke with his Saudi counterpart on Wednesday and that no decision had been made to change the global oil deal between OPEC and non-OPEC producers.  He said he does not see reasons for oil shortages.  He said the oil price correction means markets are calmer now and added that the situation has stabilized following the attacks on Saudi Arabia’s oil facilities. 

The Trump administration on Thursday is revoking California’s authority to set its own fuel efficiency standards and to require some zero-emission vehicles.  In a joint statement with the EPA, the Department of Transportation’s National Highway Traffic Safety Administration said it is affirming that federal law preempts state and local regulation of vehicle fuel economy. 

Iran warned US President Donald Trump against escalating conflict in the Middle East following the attack on Saudi Arabia’s oil facilities.

Early Market Call – as of 9:25 AM EDT

WTI – Oct $58.62, up 63 cents

RBOB – Oct $1.6933, down 74 points

HO – Oct $2.0065, up 12 points

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