Recap: The oil market traded higher on Friday amid the uncertainty in the peace talks between Russia and Ukraine. The lack of progress on a summit between Russian President Vladimir Putin and Ukraine’s President Volodymyr Zelenskiy is adding a risk premium that is reversing some of its losses seen in recent weeks. U.S. President Donald Trump said he will see if Russia’s President and Ukraine’s President will work together in ending the war in Ukraine, while Russia and Ukraine accuse the other of not being sincere or ready to negotiate in good faith. The crude market posted a low of $63.31 early in the morning before it rallied to a high of $63.93 by mid-morning. The market later erased some of its gains and settled in a sideways trading range ahead of the close. The October WTI contract settled up 14 cents at $63.66 and the October Brent contract settled up 6 cents at $67.73. The product markets ended the session lower, with the heating oil market settling down 1.7 cents at $2.3081 and the RB market settling down 1.2 cents at $2.1585.
Technical Analysis: The crude market will continue to retrace its previous losses as the war in Ukraine continues unabated and the risk of tougher U.S sanctions on Russian oil increases. The market will remain supported as it awaits further developments on the potential summit between Russia and Ukraine. The oil market is seen finding resistance at $63.93, $64.37, $65.33, $65.71, $66.28 and $66.56. Meanwhile, support is seen at $63.31, $62.52, $61.83, $61.65, $61.45, $61.29 followed by $60.63, $60.30 and $59.99.
Fundamental News: Late Thursday, the commander of Ukraine’s unmanned systems forces said Ukraine’s military again struck the Unecha oil pumping station, a critical part of Russia’s Europe-bound Druzhba oil pipeline. Meanwhile, Hungarian Foreign Minister, Peter Szijjarto, said crude oil deliveries from Russia to Hungary via the Druzhba link had been halted after an attack on the pipeline located near the Russia-Belarus border. Slovak pipeline operator Transpetrol said the flow of oil to Slovakia via the Druzhba pipeline was interrupted on Thursday evening. Both, Hungary and Slovakia said oil supplies via the Druzhba pipeline could be suspended for at least five days following the latest Ukrainian attack, calling on the European Commission to guarantee security of supplies.
S&P Global Commodity Insights is estimating U.S. oil and gas drilling rig count fell by 11 rigs to 565 in the week ending August 13th, with Permian drilling activity hit a four year low.
Baker Hughes reported that U.S. energy firms this week cut the number of oil and natural gas rigs operating for the fourth time in five weeks. It reported that the oil and gas rig count fell by one to 538 in the week ending August 22nd, the lowest since mid-July. Baker Hughes said oil rigs fell by one to 411 this week, while gas rigs held steady at 122.
IIR Energy reported that U.S. oil refiners are expected to shut in about 453,000 bpd of capacity in the week ending August 22nd, cutting available refining capacity by 202,000 bpd. Offline capacity is expected to total 318,000 bpd in the week ending August 29th and 408,000 in the week ending September 5th.
The U.S. EPA reported U.S. Renewable Identification Number credits generated in July totaled 1.9 billion, down 4,1% from June.
The U.S. EPA began clearing a backlog of requests from small oil refineries for exemptions from the nation’s biofuel laws, granting 63 and denying 28 of them, with 77 receiving partial approvals.
Early Market Call – as of 9:05 AM EDT
WTI – Oct $64.11, down 34 cents
RBOB – Sep $2.1544, down 42 points
HO – Sep $2.3365, up 2.75 cents
