Recap: The oil market posted an inside trading day and ended the session lower on Friday amid rumors of a possible agreement on shipping through the Strait of Hormuz. The market was pressured by the news that Iran agreed to draw up a list of conditions to restore normal traffic after a Qatari emissary pressed the Iranians to respect freedom of navigation. The crude market was also pressured amid hints about the U.S. Federal Reserve’s interest rate policy, with Fed Chairman Kevin Warsh pointing to a possible rate hike later this year to cut inflation. The market posted a high of $83.78 in overnight trading and traded to a low of $82.25 by mid-morning. The market later retraced some of its losses and as it failed to test its high, it settled in a sideways trading range during the remainder of the session. The October WTI contract ended the session down 13 cents at $83.40 and the October Brent contract settled down 39 cents at $89.31. Meanwhile, the product markets ended the session higher, with the heating oil market settling up 7.8 cents at $4.3567 and the RB market settling up 10.57 cents at $3.4899.
Technical Analysis: The crude market will remain headline driven amid the continuing standoff over the Strait of Hormuz. Despite the continuing efforts by mediators to reopen the Strait of Hormuz, Iran has stated that it will not reopen the waterway unless the U.S. upholds its commitments made under the memorandum of understanding signed in June, while the U.S. is mainly focused on an economic pressure campaign against Iran. The oil market is seen finding resistance at $83.78, $84.27, $84.61, $85.84, $86.57, $87.51, $87.69 and $88.07. Meanwhile, support is seen at $82.25, $80.65, $79.62, $78.67, $76.80, $75.35, $73.47 and $73.10.
Fundamental News: Goldman Sachs estimated recent total Gulf exports at about 15 million to 16 million bpd, still 7 million to 8 million bpd below pre-war levels, but 5 million to 6 million bpd above the March trough. Goldman Sachs said that although the estimates focus on total Gulf flows, the upward revisions indicate oil transits through the Strait of Hormuz are likely close to U.S. officials’ estimate of 8 million to 10 million bpd.Baker Hughes said U.S. energy firms left the overall rig count unchanged in the latest week. The total oil and gas rig count held at 588 in the week ending August 28th. It said oil rigs fell by five to 447 this week, while gas rigs increased by five to 132 and other miscellaneous rigs remained unchanged at nine.
U.S. President Donald Trump said the U.S. has entered into an oil agreement with Venezuela. He said the U.S. has secured majority U.S. control of more than 65 billion barrels of proven reserves in Venezuela.
Bloomberg News reported that Venezuela is closely examining plans to leave OPEC. The report said the idea of an exit has been a topic in conversations with U.S. officials and no final decision has been made.
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 and further to 230,000 bpd in the subsequent week.
Valero Energy reported unplanned flaring at its 85,000 bpd Wilmington, California refinery.
Early Market Call – as of 9:20 AM EDT
WTI – Oct $85.50, up $2.06
RBOB – Sep $3.4440, down 3.03 cents
HO – Sep $4.475, up 12.98 cents
