Oil Prices - August 9

[dan_s]

Crude futures drifted lower today, retreating from two-week highs ahead of the American Petroleum Institute's weekly crude inventory report on Tuesday evening after the close of trading.

Despite a relief-rally from 3-month lows, crude futures have tumbled approximately 15% from 10-month highs in mid-June when both Brent and WTI eclipsed $50 a barrel.

Energy traders will receive a clearer picture of the supply-demand balance in U.S. markets when the API releases its latest crude stockpile on Tuesday night following the close of markets. Separately, Wednesday's EIA report is expected to show that crude inventories nationwide fell by 1.0 million barrels for the week ending on August 5. Last week the EIA reported that U.S. crude stockpiles unexpectedly rose by 1.4 million barrels defying analysts' expectation for a 1.4 million draw. At 522.5 million barrels, U.S. crude oil inventories are at historically high levels for this time of year. (Last week the API reported showed a draw from storage, so the two reports are often in disagreement.)

Analysts will keep a close eye on Gasoline inventories, which are expected to decline by 1.2 million for the week. During the last week of July, gasoline stockpiles unexpectedly fell by 3.3 million barrels, amid a considerable drawdown throughout the PADD 1 district, covering the majority of the U.S. east coast. In recent weeks, worldwide gasoline inventories have swelled to around 500 million barrels, according to analysts from Citigroup Inc (NYSE:C), as refineries churn out product at a rapid pace due to historically low crude prices.

My SWAG is that the Labor Day weekend will get gasoline inventories back to normal.

Elsewhere, Iran exported 1.72 million barrels per day in June to China, India, Japan and South Korea, the Islamic Republic News Agency (IRNA) reported on Tuesday, marking a 47% increase from its level in January. Last month, senior officials from Iran's state-run National Iranian Oil Company told Bloomberg that the Gulf state expects to double exports from its pre-sanction levels in an effort to regain market share, as long as demand abroad remains high.

In India, the nation consumed 48.5 million tons of oil for the three-period ending in June, representing the swiftest pace of demand growth in more than a decade. Currently, OPEC provides 85% of all oil imports to India, more than half of which is supplied by Saudi Arabia, Iraq and Iran. While a number of analysts expect global markets to rebalance at some point in 2017, the return of Iran to markets in February following the removal of longstanding economic sanctions has exacerbated concerns related to the worldwide supply glut.