Just before noon all of the technical indicators for crude oil went from "Strong Sell" to "Strong Buy". The only reason that I can see is that WTI hit the bottom of a well defined trading channel.
The unexpected storage build that EIA reported this morning may just be a correction of the VERY LARGE draw from storage that they reported last week.
Oil Price - July 18 Afternoon
Oil Price - July 18 Afternoon
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Oil Price - July 18 Afternoon
Note sent to me by Raymond James' Energy Team with my comments in BLUE
This week's petroleum inventories update was bearish relative to consensus.
''Big Three'' petroleum inventories (crude, gasoline, distillates) rose by 2.3 MMBbls, versus consensus estimates for a draw of 3.6 MMBbls.
> Crude inventories rose by 5.8 MMBbls, versus consensus calling for a draw of 4.1 MMBbls.
> Cushing crude inventories fell by 0.9 MMBbls, with Gulf Coast inventories up 3.0 MMBbls. < So timing of imports is the reason for the build.
> Gasoline posted a draw of 3.2 MMBbls, versus consensus calling for a draw of 0.7 MMBbls; < Bullish
> Distillate inventories fell by 0.4 MMBbls, versus consensus calling for a build of 1.2 MMBbls. < Bullish
>> Total petroleum inventories were up 6.0 MMBbls.
As always, regardless of their week-to-week movements, U.S. inventories do not constitute a holistic picture of global (or even total OECD) inventories, but they represent the only ''real-time'' data source.
Refinery utilization fell to 94.3% from 96.7% last week. < Slightly bearish, but this one is a WAG by EIA
Total petroleum imports were 11.1 MMBbls per day, up from last week's 9.3 MMBbls per day. < This confirms that imports caused the build in crude oil.
Total petroleum product demand increased 7.0% after last week's 6.4% decrease. < Bullish.
On a four-week moving average basis, there is a 0.3% y/y decrease in total demand. U.S. (lower 48) production was 10.5 MMBbls per day, unchanged from last week (recall, the EIA began rounding to the nearest 100,000 Bbls per day as of June). As always, weekly demand and supply figures are provisional estimates subject to frequent revisions.
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Traders know there is a high error rate in the EIA numbers because most of them are "WAGs" based on formulas. Import are probably the most accurate numbers, but from week-to-week there can be big swings in imports because most of them are coming into the Gulf ports. We are in the middle of the tropical storm season, so weather can have a big impact on imports. Tankers are not keen on sailing into violent seas. BTW a Cat 4 hurricane can produce swells over 100 feet high, which will rip a tanker in half. Even a tropical storm (below Cat 1) can produce 30 foot swells. That is what lead to the low imports the week ending July 6.
This week's petroleum inventories update was bearish relative to consensus.
''Big Three'' petroleum inventories (crude, gasoline, distillates) rose by 2.3 MMBbls, versus consensus estimates for a draw of 3.6 MMBbls.
> Crude inventories rose by 5.8 MMBbls, versus consensus calling for a draw of 4.1 MMBbls.
> Cushing crude inventories fell by 0.9 MMBbls, with Gulf Coast inventories up 3.0 MMBbls. < So timing of imports is the reason for the build.
> Gasoline posted a draw of 3.2 MMBbls, versus consensus calling for a draw of 0.7 MMBbls; < Bullish
> Distillate inventories fell by 0.4 MMBbls, versus consensus calling for a build of 1.2 MMBbls. < Bullish
>> Total petroleum inventories were up 6.0 MMBbls.
As always, regardless of their week-to-week movements, U.S. inventories do not constitute a holistic picture of global (or even total OECD) inventories, but they represent the only ''real-time'' data source.
Refinery utilization fell to 94.3% from 96.7% last week. < Slightly bearish, but this one is a WAG by EIA
Total petroleum imports were 11.1 MMBbls per day, up from last week's 9.3 MMBbls per day. < This confirms that imports caused the build in crude oil.
Total petroleum product demand increased 7.0% after last week's 6.4% decrease. < Bullish.
On a four-week moving average basis, there is a 0.3% y/y decrease in total demand. U.S. (lower 48) production was 10.5 MMBbls per day, unchanged from last week (recall, the EIA began rounding to the nearest 100,000 Bbls per day as of June). As always, weekly demand and supply figures are provisional estimates subject to frequent revisions.
-----------------------------------------
Traders know there is a high error rate in the EIA numbers because most of them are "WAGs" based on formulas. Import are probably the most accurate numbers, but from week-to-week there can be big swings in imports because most of them are coming into the Gulf ports. We are in the middle of the tropical storm season, so weather can have a big impact on imports. Tankers are not keen on sailing into violent seas. BTW a Cat 4 hurricane can produce swells over 100 feet high, which will rip a tanker in half. Even a tropical storm (below Cat 1) can produce 30 foot swells. That is what lead to the low imports the week ending July 6.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group