Oil Price - June 30

dan_s · Post by **dan_s** » Fri Jun 30, 2017 4:22 pm

Today's big move up in WTI is probably just a short covering rally ahead of the 4th of July holiday next week. A lot of families will be hitting the road next week (including Susan & I). Plus, all of the boats burn up a lot of gasoline. The big fundamental change was the unexpected drop in U.S. oil production. Some of the drop is because of tropical storm Cindy, but I don't think that can explain the whole decline. As I said at Friday's EPG luncheon in Houston, U.S. oil production growth could not and will not keep of the pace set in Q1 of this year. - Dan

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Friday, June 30, 2017

Oil prices posted strong gains this week, largely from speculators closing out short bets. Hedge fund and other money managers had built up a record volume of bearish bets on crude over the past month, and it appears that a liquidation of them has driven crude prices higher. The big question is whether or not that gains will continue. Dennis Gartman of The Gartman Letter told CNBC that the latest rally is a “dead cat bounce” that won’t last. But others are hoping that the recent selloff went too far and that the gains are here to stay.

EIA figures show drop off in production. The weekly EIA data provided a huge boost to the morale of oil bulls this week, showing a massive drop in U.S. oil production by 100,000 bpd. To be sure, the release is one data point, and should be taken with a grain of salt. But if the EIA posts successive production declines in the weeks ahead, it would go a long way to easing the fear among oil traders. The production decline allowed traders to look past the lack of an inventory drawdown – oil prices moved up on the news.

Goldman slashes oil price forecast by $7.50 per barrel. This week, Goldman Sachs lowered its three-month estimate for WTI prices from $55 per barrel to $47.50, citing higher production from Libya and Nigeria, as well as the ramp up in U.S. shale drilling. Nonetheless, the investment bank says that the oil market is still moving towards balance, even if slowly. Inventories are falling, demand is rising, and OPEC could do more to cut – and Goldman says it should.

Asian demand to pick up. Reuters reports that low prices are likely to lead to higher crude purchases from Asia. Oil has piled up in the Atlantic Basin, leading to fears of too much supply, but lower prices will spark greater demand. It is a small sign that things might not be as bad as they seem.

Libyan production approaches 1 million barrels per day. Libya’s output has broken a new multi-year high, rising above 950,000 bpd, according to Reuters. That’s up from 935,000 bpd last week. A Libyan source told Reuters that production is fluctuating and coming “close to” 1 million barrels per day. Rising Libyan output is undermining the effectiveness of the OPEC deal.