Recap: The oil market on Wednesday retraced some of its recent losses as the market weighed the news of talks regarding the Strait of Hormuz between Iran and Oman and the continuing low volume of oil flowing through the waterway. The market remained pressured in overnight trading, posting a low of $79.62 after the Revolutionary Guards said Iran and Oman reached an agreement on how to share the Strait of Hormuz and its revenues. However, the crude market bounced off its low and retraced its losses as a senior Iranian official said Iran and Oman were still working on the details of an agreement. The oil market traded to a high of $83.31 in afternoon trading. The market was also supported by the smaller than expected build in crude stocks of 95,000 barrels for the week ending August 21st. The October WTI contract later settled in a sideways trading range ahead of the close and ended the session down 13 cents at $82.23. The October Brent contract settled down 74 points at $87.84. The product markets ended the session higher, with the heating oil market settling up 1.62 cents at $4.26 and the RB market settling up 6.72 cents at $3.3201.
Technical Analysis: The crude market is seen remaining in its recent trading range as the market weighs the uncertainty over a possible agreement between Iran and Oman to enable the safe passage of oil exports through the Strait of Hormuz against Iran’s continued stance that the waterway will not reopen unless the U.S. meets Iran conditions set under the interim agreement signed in June. The oil market is seen finding resistance at $83.31, $85.84, $84.36, $86.57, $87.51, $87.69 and $88.07. Meanwhile, support is seen at $79.62, $78.67, $76.80, $75.35, $73.47 and $73.10.
Fundamental News: On Tuesday, Axios reported that Secretary of State Marco Rubio told allies that the U.S. did not expect to launch new strikes against Iran for now, and would instead focus on other means of pressure. Separately, Iranian army spokesman Brigadier General Mohammad Akrami-Nia said new equipment had been delivered to combat units and fighting against two technologically advanced militaries had provided Iran’s forces with significant battlefield experience.
Shipping data showed that two supertankers carrying 4 million barrels of Saudi crude are bound for China after loading the cargoes via ship-to-ship transfers off Oman. Sources stated that Saudi Aramco has offered more crude oil for loading outside the Strait of Hormuz in September.
Preliminary shipping data showed that five commodity vessels transited the Strait of Hormuz on Tuesday, little changed from a day earlier but well below the 10-day average of 15. Initial data from shiptracker Kpler showed that two tankers carrying liquefied petroleum gas and one tanker carrying bitumen exited the Gulf via the strait, while two empty product tankers entered the waterway from the Gulf of Oman. On Monday, four commodity vessels transited the waterway. According to Kpler data, transits through the Bab el-Mandeb were also little changed at 31 commodity vessels versus 29 the day before, but in line with the 10-day average.
IIR Energy said U.S. oil refiners are expected to shut in about 8,000 bpd of capacity for the week ending August 28th, increasing available refining capacity by 67,000 bpd. Offline capacity is expected to fall to 3,000 bpd in the week ending September 4th.
Pemex reported continuation of work that may cause flaring at its Deer Park, Texas refinery. The maintenance work started on August 4th.
Early Market Call – as of 9:00 AM EDT
WTI – Oct $82.50, up 59 cents
RBOB – Sep $3.3166, up 3.41 cents
HO – Sep $4.1832, down 4.18 cents
