Recap: The oil market posted an inside trading day on Friday and remained well supported by the U.S. threats of economic sanctions on Iran’s trading partners, raising concerns that the end to the Iran war is nowhere near. Iran said its response to any new U.S. threats would be “devastating” after the U.S. pledged to impose financial penalties with the aim of toppling the Iranian regime. The crude market posted the day’s trading range in early morning trading. It remained below the $87 level for much of the overnight session and posted a low of $85.80 before it traded to a high of $87.51, where it held resistance during the remainder of the day. The October WTI contract settled up 23 cents at $87.06 and the October Brent settled up 61 cents at $94.39. The product markets ended the session higher, with the heating oil market settling up 1.45 cents at $4.4948 and the RB market settling up 8.5 cents at $3.3479.
Technical Analysis: The market will remain supported as the U.S. increases its pressure on Iran and the impasse on finding a diplomatic resolution as the war continues. While the immediate impact of the threatened economic sanctions to Iranian exports may be limited amid the U.S. naval blockade, any incidents in the waterway and retaliation against economic sanctions could worsen the already low oil exports flowing through the Strait of Hormuz. The crude market is seen finding resistance at $87.51, $87.69, $88.07, $88.54, $90.14, $90.65, $91.09 and $91.27. Meanwhile, support is seen at $85.80, $84.23, $83.45, 80.80, $79.91, $79.31 and $76.80.
Fundamental News: Oman’s state news agency said the Omani and Iranian Foreign Ministers discussed in a phone call ways to create suitable conditions for resuming dialogue and negotiations and developments affecting navigation in the Strait of Hormuz.
According to trade sources, offers of Iranian crude to Chinese buyers have declined and prices have increased this week as the U.S. blockade has cut Tehran’s shipments. The number of offers for Iranian oil cargoes to China for September and October delivery has declined from July and August cargoes. Sources said the offers have declined as barrels already in ships on the water have been sold. According to data from ship-tracking company Kpler, Iran’s oil exports have fallen since mid-July, with no visible crossings of the Strait of Hormuz by supertankers carrying Iranian crude since then, although many vessels turn off their location transponders, making them difficult to track. Kpler data showed that Iranian crude held in floating storage outside the U.S. blockade zone has fallen to about 80 million barrels from about 105 million barrels before the blockade was reinstated. Two of the sources estimated that only about 30 million barrels of Iranian crude remained in Asian waters, half of the usual levels. Kpler Senior Crude Oil Analyst, Muyu Xu, estimated there are 40 million barrels of Iranian oil on ships in Malaysian waters east of Singapore, though most of that has been promised to buyers.
Baker Hughes reported that U.S. energy firms this week cut the number of rigs operating for the first time in four weeks. The total oil and gas rig count fell by five to 588 in the week ending August 21st. Baker Hughes said oil rigs fell by three to 452 this week, while gas rigs fell by one to 127 and other miscellaneous rigs fell by one to nine.
IIR Energy said U.S. oil refiners are expected to shut in about 75,000 bpd of capacity in the week ending August 21st, increasing available refining capacity by 88,000 bpd. Offline capacity is expected to fall to 8,000 bpd in the week ending August 28th and further to 3,000 bpd in the subsequent week.
Early Market Call – as of 8:45 AM EDT
WTI – Sep $85.60, down $1.05
RBOB – Sep $3.2657, down 5.63 cents
HO – Sep $4.3839, down 7.86 cents
