Recap: The oil market ended the session relatively unchanged on Monday as it remained range bound as OPEC+ approved another production target increase starting in August and Saudi Arabia cut its official selling prices. The crude market posted a high of $69.26 during Friday’s shortened trading session in observance of the July 4th holiday. The market erased some of its gains during the remainder of Friday’s session and continued to trade lower following the reopening on Sunday evening after OPEC+ agreed to further increase its output targets from August and Saudi Arabia cut its official selling prices for August. The crude market sold off to a low of $68.58 in overnight trading before it bounced off that level and remained in a sideways trading range throughout the session. The August WTI contract settled down 14 cents at $68.55 and the August Brent contract settled down 13 cents at $71.99. The product markets ended the session higher, with the heating oil market settling up 11.62 cents at $3.2984 and the RB market settling up 8.6 cents at $3.0033.
Technical Analysis: The crude market will continue to trend sideways as the market weighs the news of the OPEC+ production increase and exports continuing to flow through the Strait of Hormuz, while traders keep a close eye on talks between the U.S. and Iran. On Monday, President Donald Trump stated that the U.S. would either reach a deal with Iran or “finish the job”, renewing his threat of military action as Iran projects defiance following the funeral of former Supreme Leader Ayatollah Ali Khamenei. The crude market is seen finding support at $67.82, $67.04, $66.96 to $66.29, $63.86 and $63.16. Meanwhile, resistance is seen at $69.26, $70.19, $71.60, $71.86, $72.50, $73.18, $74.45, $77.34, $78.14, $79.18, $80.15 and $81.00 to $81.68.
Fundamental News: According to data from the Department of Energy, crude oil stocks in the U.S. Strategic Petroleum Reserve fell by 6.2 million barrels to 319.5 million barrels, the lowest level since April 1983. The drawdowns are a part of a U.S. agreement to release 172 million barrels from the facility.
On Sunday, OPEC+ agreed on a further increase in output targets from August, adding to global supply at a time when oil prices are falling due to the gradual reopening of the Strait of Hormuz for oil exports. The oil-producing group agreed during an online meeting to increase quotas by 188,000 bpd from August, on top of similar increases for June and July. The seven core members of OPEC+, which groups OPEC and allied producers including Russia, have hiked their output quotas from April through July by almost 800,000 bpd. However, the increase has remained largely on paper because of the U.S.-Israeli war on Iran, which closed the Strait of Hormuz to tanker traffic for some of the most important OPEC+ members, including Saudi Arabia, Kuwait and Iraq. According to Reuters calculations, from August, taking into account the UAE’s exit from May 1, the seven core members will still have about 379,000 bpd of the original cut to return to the market. With the August increase now decided, they will have fully unwound the 2023 cut if they make one more hike of around the same size for September at their next meeting on August 2nd.
The United Arab Emirates raised its crude output to near record highs above 3.8 million bpd in June after it quit OPEC to escape production caps. June’s output was the highest since April 2020.
IIR Energy said U.S. oil refiners are expected to shut in about 264,000 bpd of capacity in the week ending July 10th, increasing available refining capacity by 153,000 bpd. Offline capacity is expected to decrease to 252,000 bpd in the week ending July 17th.
Early Market Call – as of 8:50 AM EDT
WTI – Aug $69.28, up 68 cents
RBOB – Aug $2.9502, down 5.32 cents
HO – Aug $3.2548, down 4.58 cents
