Investing.com – U.S. oil inventories fell last week by more than the market anticipated, according to the American Petroleum Institute’s estimate released late Tuesday.
Crude stockpiles dropped by 5.9 million barrels for the week ended Jan. 3, the API reported, compared with a plunge of about 11.5 million barrels reported for the week before.
The Energy Information Administration is expected to report a drop of about 3.6 million barrels when it issues official numbers tomorrow, according to analysts’ forecasts.
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Last night the price of WTI oil spiked to over $65/bbl when first reports of the Iranian missile attack on U.S. military bases inside Iraq. After reports that there were no U.S. casualties the oil price pulled back to $62/bbl. There are vague reports of how much damage was done by the missile attack and opinions that Iran missed their targets to avoid all out war. Lots of options for the U.S. at this point, but doing nothing doesn't sound likely to me. I'm sure the oil traders are on "high alert".
Phil Flynn: "Oil may see some weakness if there are no new headlines. Still, we expect the market to stay strong. Look to buy breaks and use options strategies to play the madness."
Oil Price - Jan 8
Oil Price - Jan 8
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - Jan 8
Oil price pulls back to $60 because traders think we are now at peace with Iran. Trump has decided not to respond with a military attack to Iran's unsuccessful missile attack last night. However, he is going to increase the sanctions against Iran, saying they must stop their nuclear program and the funding of terrorist groups in the Middle East. I doubt the Iranians will give up on their ambitions, but at least Trump is giving them a peaceful option.
This does not remove the fact that U.S. oil production growth has stopped and will likely go on decline in Q1. Regardless of what happens with Iran, the global oil market will get tight this summer.
This does not remove the fact that U.S. oil production growth has stopped and will likely go on decline in Q1. Regardless of what happens with Iran, the global oil market will get tight this summer.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - Jan 8
Opinions from EFT Trends:
WTI crude oil climbed nearly $3 a barrel on Wednesday to reach $65.50 before falling off dramatically after concerns over the Iran counterattack eased. Oil is trading below $60 a barrel, while stocks have once again approached all-time highs.
The sensitive commodity spiked and then recoiled Wednesday morning, following the concern that arose after an Iranian missile attack on Iraqi military bases and the subsequent relief that it didn’t cause any deaths or damage any energy infrastructure.
President Trump assuaged markets, tweeted, “All is well! Missiles launched from Iran at two military bases located in Iraq. Assessment of casualties & damages taking place now. So far, so good! We have the most powerful and well equipped military anywhere in the world, by far! I will be making a statement tomorrow morning.”
Still, there is considerable debate about where the price of oil will be in the coming year.
Oil tycoon Harold Hamm predicts crude oil prices to reach $75 a barrel, regardless of the outcome of rising tensions in the Middle East that has sent crude to multi-month highs. Raymond James official oil price forecast was that WTI would be $60 in 1H 2020 and then rise to $75/bbl by year-end. RJ's forecast is based solely on supply/demand fundamentals and there is nothing in their forecast for an unplanned supply outage as a result of a war with Iran.
‘I think we’re probably headed for $75 oil price in the next six months,” said Hamm. “That’s where the market’s going, and we’ll get there. It’s not too much to ask.”
While past shocks to the oil market, such as the drone attack to Saudi Aramco last September, have resulted in initially massive rallies of as much as 20%, followed by a move back down to prevailing levels, some analysts believe the same type of action could be in the works this time.
“It is unlikely that oil prices will soar to levels that will cause yet another global recession,” Ed Yardeni of Yardeni Research wrote in a note on Monday. “If Middle Eastern oil supplies are disrupted, ample strategic petroleum reserves are available to mute any oil price shock. Higher oil prices would also stimulate even more oil production by US frackers.”
Still, after years of languishing, in 2019, Brent crude gained 23% and WTI gained 35%, posting their best annual performances since 2016.
Other analysts see this as possibly just a short term disruption to the oil markets.
“The extent of the retaliatory attacks looks to have been limited,” JBC Energy wrote in a note to clients on Wednesday. “The market will be watching keenly today for hints as to whether or not President Trump will step into a further cycle of escalation.”
“I think the markets are more rational about this particular subject than a lot of subjects. …There’s not a lot of belief the Iranian leaders would want to do things that would seriously make this conflict a lot worse,” said Don Townswick, director of equities strategies at Conning, which provides services for the insurance industry and other clients. “All that really does is give the administration the ability to treat Iranian leaders like they did Soleimani. I just think the market isn’t worried about it. I also think the threat to the oil supply is not as dramatic as it was because of increased U.S. production.”
WTI crude oil climbed nearly $3 a barrel on Wednesday to reach $65.50 before falling off dramatically after concerns over the Iran counterattack eased. Oil is trading below $60 a barrel, while stocks have once again approached all-time highs.
The sensitive commodity spiked and then recoiled Wednesday morning, following the concern that arose after an Iranian missile attack on Iraqi military bases and the subsequent relief that it didn’t cause any deaths or damage any energy infrastructure.
President Trump assuaged markets, tweeted, “All is well! Missiles launched from Iran at two military bases located in Iraq. Assessment of casualties & damages taking place now. So far, so good! We have the most powerful and well equipped military anywhere in the world, by far! I will be making a statement tomorrow morning.”
Still, there is considerable debate about where the price of oil will be in the coming year.
Oil tycoon Harold Hamm predicts crude oil prices to reach $75 a barrel, regardless of the outcome of rising tensions in the Middle East that has sent crude to multi-month highs. Raymond James official oil price forecast was that WTI would be $60 in 1H 2020 and then rise to $75/bbl by year-end. RJ's forecast is based solely on supply/demand fundamentals and there is nothing in their forecast for an unplanned supply outage as a result of a war with Iran.
‘I think we’re probably headed for $75 oil price in the next six months,” said Hamm. “That’s where the market’s going, and we’ll get there. It’s not too much to ask.”
While past shocks to the oil market, such as the drone attack to Saudi Aramco last September, have resulted in initially massive rallies of as much as 20%, followed by a move back down to prevailing levels, some analysts believe the same type of action could be in the works this time.
“It is unlikely that oil prices will soar to levels that will cause yet another global recession,” Ed Yardeni of Yardeni Research wrote in a note on Monday. “If Middle Eastern oil supplies are disrupted, ample strategic petroleum reserves are available to mute any oil price shock. Higher oil prices would also stimulate even more oil production by US frackers.”
Still, after years of languishing, in 2019, Brent crude gained 23% and WTI gained 35%, posting their best annual performances since 2016.
Other analysts see this as possibly just a short term disruption to the oil markets.
“The extent of the retaliatory attacks looks to have been limited,” JBC Energy wrote in a note to clients on Wednesday. “The market will be watching keenly today for hints as to whether or not President Trump will step into a further cycle of escalation.”
“I think the markets are more rational about this particular subject than a lot of subjects. …There’s not a lot of belief the Iranian leaders would want to do things that would seriously make this conflict a lot worse,” said Don Townswick, director of equities strategies at Conning, which provides services for the insurance industry and other clients. “All that really does is give the administration the ability to treat Iranian leaders like they did Soleimani. I just think the market isn’t worried about it. I also think the threat to the oil supply is not as dramatic as it was because of increased U.S. production.”
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - Jan 8
Overnight trading saw crude gain as much as 4.5%, to highs of $65.62, before finishing 9.5% lower from the intraday peak on Wednesday.
Today’s trading action saw the erosion of the geopolitical risk premium to levels prior to the killing of General Soleimani.
Reasons for the drop in crude prices largely stemmed from the market already having priced in a large risk premium despite a lack of supply disruption, a mild Iranian response, and tame rhetoric from President Trump.
Despite today’s losses, it should be noted that there is still some additional risk of renewed conflict in the region.
WTI prompt month (FEB 20) was down $3.09 on the day, to settle at $59.61/Bbl.
Also, NG prompt month (FEB 20) was down $0.021 on the day, to settle at $2.141/MMBtu.
Today’s trading action saw the erosion of the geopolitical risk premium to levels prior to the killing of General Soleimani.
Reasons for the drop in crude prices largely stemmed from the market already having priced in a large risk premium despite a lack of supply disruption, a mild Iranian response, and tame rhetoric from President Trump.
Despite today’s losses, it should be noted that there is still some additional risk of renewed conflict in the region.
WTI prompt month (FEB 20) was down $3.09 on the day, to settle at $59.61/Bbl.
Also, NG prompt month (FEB 20) was down $0.021 on the day, to settle at $2.141/MMBtu.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group