Recap: The oil market on Thursday traded higher, remaining in its recent trading range, on continuing concerns over supply from the Middle East amid an increase in attacks on shipping in the Strait of Hormuz. The market was also well supported by energy firms shutting in production in the Gulf as Hurricane Isaias approached. The oil market posted a low of $88.77 in overnight trading and rallied higher. It extended its gains to over $4.90 and retraced more than 38% of its move from a high of $101.69 to a low of $86.86 as it posted a high of $93.20 by mid-day. However, the market retraced more than 62% of its earlier rally and traded back to $90.25 after President Donald Trump said the U.S. will not attack Iran at any time prior to the mid-term elections. The crude market later once again rebounded ahead of the close. The November WTI contract settled up $3.21 at $91.49 and the December Brent contract settled up $4.08 at $104.28. The product markets ended the session sharply higher, with the heating oil market settling up 26.02 cents at $4.8829 and the RB market settling up 8.18 cents at $3.3160.
Technical Analysis: The oil market will continue to trend higher on Friday as it remains well supported by supply concerns in the Middle East and the output cuts in the Gulf Coast ahead of Hurricane Isaias making landfall late Friday, early Saturday as a possible Category 3 hurricane. The market is seen finding resistance at $93.20, $93.51, $93.68, $94.28, $94.74, $96.02, $96.54, $96.78 followed by $97.22, $98.01, $100.61 and $101.69. Meanwhile, support is seen at $91.50, $88.77, $87.96, $86.86, $85.92, $84.24, $82.47 and $82.17.
Fundamental News: According to the Marine Minerals Administration, U.S. Gulf of Mexico oil and gas producers have shut in about 62.89% of current oil production and 57.35% of current natural gas production as of Thursday, as operators continued to respond to Hurricane Isaias. Energy research and consultancy firm Energy Aspects estimated that about 500,000 bpd of refining capacity is in the storm’s path, including the Pascagoula refinery. The region also produces an average of about 2.1 billion cubic feet per day of natural gas.
BP said on Thursday it has removed all personnel from Na Kika and Thunder Horse platforms and shut in production at both platforms as a precaution ahead of approaching Hurricane Isaias. It said it also removed non-essential personnel from our Argos, Atlantis and Mad Dog platforms. On Wednesday, Shell and Chevron they were curtailing offshore operations at their Gulf platforms due to Hurricane Isaias.
Bloomberg reported that Saudi Arabia is in talks with customers to offer oil loadings next year outside the Strait of Hormuz in long-term contracts, formalizing a system the country has been using during the Iran war as it seeks greater market share.
Iran’s Foreign Minister, Abbas Araqchi, said Iran is still reviewing Washington’s response to its proposal under which the Strait of Hormuz could be reopened within seven days and added that it could reply within days.
A military spokesperson for Yemen’s Iran-backed Houthis on Wednesday warned workers at Saudi oil facilities to avoid sites the group considers targets and renewed threats of attacks against airlines and airports.
Bloomberg noted that while Iran’s latest increase in attacks on tankers in the Strait of Hormuz should cause a decline in exports, crude shipments are nearing prewar levels and increasing freight costs are pulling tankers to the Middle East rather than driving them away.
Early Market Call – as of 8:40 AM EDT
WTI – Nov $91.09, down 42 cents
RBOB – Nov $3.2920, down 2.40 cents
HO – Nov $4.7869, down 9.6 cents
