The Oil Market on Monday Sold Off as Concerns Over Supply Eased on Hopes of a Ceasefire Deal in Gaza

Recap:  The oil market on Monday sold off as concerns over supply eased on hopes of a ceasefire deal in Gaza. The market was pressured as talks over a U.S. ceasefire plan to end the nine month old war in Gaza are under way and are being mediated by Qatar and Egypt. The crude market posted its high of $83.32 on the opening overnight ahead of Hurricane Beryl’s landfall in Texas early on Monday. The market was initially supported as the Ports of Corpus Christi, Houston, Galveston, Freeport and Texas City were closed on Sunday to prepare for the hurricane. However, the market retraced any of its gains and sold off to a low of $82.10 early on Monday. The market later bounced off its low and traded sideways as it held resistance at the 83.00 level as major refineries along the Gulf Coast saw minimal impacts from the storm. The August WTI contract settled down 83 cents at $82.33 and the August Brent contract settled down 79 cents at $85.75. The product markets ended the session lower, with the heating oil market settling down 2.33 cents at $2.5791 and the RB market settling down 2.12 cents at $2.5379.

Technical Analysis:  The market will likely continue to erase some of the gains seen over the previous four weeks as concerns over the conflict in the Middle East ease amid talks of a possible ceasefire agreement. Technically, the market may continue to trend lower as its daily stochastics, which have been in over bought territory, cross back to the downside. The market is seen finding support at its low of $82.10, $81.38, $80.97, $80.51, $80.18 and $79.91. Meanwhile, resistance is seen at $82.90, $83.32, $84.28, $84.52 and $85.27.

Fundamental News:  The Texas energy industry braced for Hurricane Beryl’s impact on Monday, with threats from the storm forcing the closure of key oil and gas shipping ports, slowing refining and prompting the evacuation of some production sites. Hurricane Beryl, which made landfall near Matagorda, Texas, packing maximum sustained winds of 80 mph is posing problems in Texas. The U.S. National Hurricane Center said the storm’s center was forecast to move over eastern Texas on Monday, before passing over the Lower Mississippi Valley into the Ohio Valley later in the week. Over the weekend, the port of Corpus Christi, the country’s leading crude oil export hub, closed operations and vessel traffic in preparation for Beryl. The ports of Houston, Galveston, Freeport and Texas City were also shut ahead of the storm making landfall. The Corpus Christi Ship Channel reopened by mid-day Monday with no significant impacts from the storm. The Port of Houston said that operations will remain suspended for the day and for Tuesday morning as terminal prepares to resume operations. The 52-mile Houston Ship Channel, which on Sunday operated under transit restrictions before halting all traffic, allows access to 8 public facilities and some 200 private terminals. Enbridge Inc, which runs crude oil export facilities near Corpus Christi, also said it had activated emergency plans for assets along or near the U.S. Gulf Coast. Some oil producers, including Shell and Chevron had also shut in production or evacuated personnel from their Gulf of Mexico offshore platforms.

IIR Energy said U.S. oil refiners are expected to shut in about 260,000 bpd of capacity in the week ending July 12th, cutting available refining capacity by 151,000 bpd. Offline capacity is expected to remain unchanged at 260,000 bpd in the week ending July 19th.

Citgo Petroleum Corp was cutting production at its 165,000 bpd Corpus Christi refinery on Saturday. The refiner plans to keep the plant in operation at minimum during Hurricane Beryl’s passage.

A brief power interruption on Friday night triggered multiple unit malfunctions at Valero Energy Corp’s 360,000 bpd Port Arthur, Texas refinery.

Marathon Petroleum Corp’s 631,000 bpd Galveston Bay refinery in Texas City, Texas suffered a power interruption on Monday as Hurricane Beryl came onshore.

Early Market Call – as of 8:45 AM EDT

WTI – Aug $81.78, down 55 cents 

RBOB – Aug $2.5283, down 96 points

HO – Aug $2.5558, down 2.33 cents

This market update is provided for information purposes only and is not intended as advice on any transaction nor is it a solicitation to buy or sell commodities. Sprague makes no representations or warranties with respect to the contents of such news, including, without limitation, its accuracy and completeness, and Sprague shall not be responsible for the consequence of reliance upon any opinions, statements, projections and analyses presented herein or for any omission or error in fact. The views expressed in this material are through the period as of the date of this report and are subject to change based on market and other conditions. This document contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance or results and actual results or developments may differ materially from those projected. The whole or any part of this work may not be reproduced, copied, or transmitted or any of its contents disclosed to third parties without Sprague’s express written consent.