Oil Price - July 9

[dan_s]

WTI crude oil prices settled higher Monday, but were under pressure as Canada's Syncrude operations are set to resume activity sooner than expected. Suncor Energy said Monday its Syncrude oil sands project in Canada would resume some production in July, sooner than expected, and hit full capacity in September, following an outage last month that disrupted total output.

Supporting the Bulls:

Inventories at Cushing, Okla., the delivery point for U.S. crude futures, are now at their lowest level in 3-1/2 years. Cushing inventories fell to 27.78 million barrels for the week ended June 29, according to the Energy Information Administration. Cushing's total storage capacity is near 70 million barrels, but "working storage capacity" is ~64 million barrels.

The tentative start to the week for WTI crude oil prices emerged as investors continued to weigh the impact on global crude stockpiles of ongoing supply outages in Libya against increased output from OPEC producers. Libya's national oil output has dropped to 527,000 barrels per day (bpd) from a high of 1.28 million bpd in February, the head of the National Oil Corporation said on Monday.

In a bid to prevent a global crude supply shortage – amid rising oil demand and ahead of U.S. sanctions on Iran – Saudi Arabia reportedly raised output by 458,000 barrels a day (bpd) in June from the prior month.

But market participants continue to expect that oil demand will outstrip supply as major oil producing countries have little spare capacity. < The last time global spare production capacity was this low, WTI ran up to $147/bbl.

Gains in U.S. crude oil prices, meanwhile, were limited as investors continued to digest data released Friday from Baker Hughes showing the number of U.S. oil drilling rigs in operation rose by 5 to 863 in the week to June 29.

Rising U.S. rig counts – widely viewed as a sign of increased activity in the sector – has shifted the focus to domestic crude output growth.

EIA has reported U.S. crude oil production at 10.9 million barrels per day for four weeks in a row. < My take is that EIA found out that they got a bit ahead of themselves (after seeing that their weekly "WAGs" were much higher than the actuals that were reported by the states), so rather than show a decline in U.S. production they are just holding it steady.

IEA's monthly "Oil Market Report" for July is expected to be published late this week. It will be interesting to read IEA's take on the global oil markets since this is their first monthly report since the OPEC+ announcements on June 22 to increase production by a million barrels per day.

[dan_s]

I just went to the CME Group website and watch their daily commentary on WTI. They see strong support for WTI at $70/bbl and they believe the next move is to $78.50/bbl. That would put us firmly in Stage 5 of this cycles Rebound Phase.