PVM Midday Report 12 July 2016

Headlines

1. OPEC sees 2017 global oil demand growth at 1.15 mbpd, call on its oil to rise by 1 mbpd
2. Secondary sources reveal OPEC crude oil output rose by 264,000 bpd in June
3. Chinese domestic oil consumption to rise by annual average rate of 2% until 2027 – CNPC
4. Saudi oil minister claims oil prices need to remain above $50/bbl to sustain investment

Oil                                                                                              

Fundamentals: In giving its first take on the global oil supply/demand balance for next year, OPEC has predicted that oil demand growth will reach 1.15 mbpd in 2017 which is marginally down on the 1.19 mbpd forecast for this year. Moreover, it expects the call on its oil will rise by more than 1 mbpd to 32.98 mbpd and projects that the contraction in non-OPEC crude output will ease considerably to 110,000 bpd next year compared to the 880,000 bpd decline forecast for this year. Meanwhile, secondary sources have revealed that the organisation’s crude output, which now includes new member Gabon, rose by 264,000 bpd in June. Elsewhere, long-term forecasts released by China’s National Petroleum Corporation have shown that it expects Chinese oil consumption to rise to 670 million tonnes by 2027 at an annual growth rate of 2% and its annual oil output to increase to 230 million tonnes by 2030.

Technicals: The market is in a volatile corrective mode. The clue early today for some recovery was Heat and RBOB testing their 5 day MA resistances. The message was that a move over them would create a move to the 8s. The key now to this correction higher is the action at the 8s. These are on WTI around 47.27; Brent 48.57; Heat 145.22; RBOB 142.71; and Gasoil 426.00. The most important 8 day is RBOB’s around 142.71. A move confirmed by a close over here would point to further strength on this rally. The stochastics are wavering, but have moved positive on RBOB. This recovery may well have more to go (higher) yet. Watch RBOB’s 8 day for guidance.

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