Oil prices rose to their highest level in 5 weeks

Recap: A rally in oil futures faded by the end of Thursday’s trading session, prompting U.S. prices to erase nearly all of their earlier gains as plans for U.S.-China trade talks next month failed to fully calm nervousness over the outlook for the global economy. With U.S. oil inventories falling across the board, oil prices rose to their highest level in 5 weeks, with October WTI breaching key resistance set at $57.00 as it rose to a session high of $57.76 a barrel, for a gain of $1.50, or 2.6%. November Brent broke above $62.00, to top the session at $62.39 a barrel, a gain of $1.69, or 2.7%. Uncertainty regarding the unsettled trade deal between the U.S. and China swept through the marketplace, forcing prices below unchanged into and after the settlement period. With gains pared, October WTI settled at $56.30 a barrel, up 4 cents, or 0.07%, while November Brent tacked on 25 cents, or 0.41%, to settle at $60.95 a barrel.  October RBOB picked up 1.3 cents, or 0.9%, to $1.546 a gallon, while October heating oil added nearly a penny, or 0.4% to $1.8885 a gallon.

Technical Analysis: All we can say is WOW. After posting such an impressive move to the upside, WTI slipped back below several key resistance levels, which include $57.00, the downward trend line that can be depicted on a daily spot continuation chart and the 50 and 200-day moving averages currently set at $56.31 and $56.00 respectively. Our stance remains the same, and that is for this market to remain range bound between $57.50 and $52.50. Support is set at $53.00, with additional support set at $52.50. To the upside and above $57.00, additional resistance can be found at $58.96. 

Fundamental News: Saudi Crown Prince, Mohammed bin Salman, and Iraqi Prime Minister, Adel Abdul Mahdi, discussed in a phone call the importance of achieving oil market stability through joint cooperation. 

According to Kpler, OPEC’s seaborne crude oil exports in August increased by 177,000 bpd to 22.95 million bpd. 

China and the US agreed to hold high-level talks in early October in Washington.  The meeting was arranged during a phone call between Chinese Vice Premier, Liu He, and US Trade Representative, Robert Lighthizer, and US Treasury Secretary, Steven Mnuchin.  On Sunday, the US began imposing 15% tariffs on an array of Chinese imports, while China began placing duties on US crude oil.  The US plans to increase the tariff rate to 30% from the 25% duty already in place on $250 billion worth of Chinese imports starting on October 1st. 

China’s Unipec is reselling some of the crude oil it imports from the US to buyers in India and South Korea to avoid tariffs China imposed in its trade war with the US.  Unipec is China’s main buyer of US crude, however its imports have been disrupted after China placed a 5% tariff on US crude imports starting September 1st.  More Asian refiners are buying US crude because of tighter supply caused by US sanctions on Iran and Venezuela.

US worker productivity slowed in the second quarter.  The US Labor Department said nonfarm productivity increased at an unrevised 2.3% annualized rate in the second quarter. 

The US Labor Department said the number of initial unemployment benefit claims in the week ending August 31st increased by 1,000 to 217,000.  Separately, according to the ADP National Employment Report, US private employers added 195,000 jobs in August, which was over economists’ expectations of a gain of 149,000 jobs. 

New orders for US-made goods increased for a second consecutive month in July as orders for transportation equipment increased by the most in nearly a year.  Factory goods orders increased by 1.4% and data for June was revised slightly lower to show factory orders increasing 0.5% instead of increasing 0.6% as previously reported. 

Early Market Call – as of 8:25 AM EDT

WTI – Oct $55.52, down 78 cents

RBOB – Oct $1.5238, down 2.18 cents

HO – Oct $1.8569, down 3.11 cents

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