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PVM Midday Report 13 July 2016

Published Wednesday, July 13th, 2016

Headlines

  1. IEA expects return to growth in non-OPEC oil supply next year; demand to rise by 1.3 mbpd
  2. OPEC crude oil output rises by 400,000 bpd in June to 8-year high of 33.21 mbpd – IEA
  3. Nigerian oil workers’ union agrees to suspend proposed strike
  4. Chinese crude oil imports drop by 5% on the month in June to 30.62 million tonnes
  5. Eurozone industrial production falls by a bigger-than-expected 1.2% in May

Oil                                                                                              

Fundamentals: Oil prices are reversing part of yesterday’s bounce as investors absorb a slew of bearish factors. They include the latest API report which revealed a 2.2 million bbl increase in US crude oil stockpiles in what would be the first rise in eight weeks if this build is confirmed later by the EIA. Downward price pressure is also coming from reports that a planned Nigerian oil strike has been suspended as well as figures pointing to a 5% dip in Chinese June crude oil imports. Meanwhile, the IEA has released its latest oil supply/demand estimates and expects oil demand growth to ease slightly next year to +1.3 mbpd. Moreover, it expects the 2017 call on OPEC crude oil to rise by 1 mpbd to 33.70 mbpd and predicts that non-OPEC output will return to growth next year with an increase of 200,000 bpd. This compares to a forecasted 900,000 bpd fall this year. Finally, it revealed that OPEC crude oil output jumped by 400,000 bpd last month to an eight-year high of 33.321 mbpd.

Technicals: The contracts have not punched higher and are still being held back by the 8 day MAs. These are key pivotal resistances today, and are on WTI around 46.41; Brent 47.79; Heat 144.57; RBOB 141.57; and Gasoil 423.25. These are strong resistances and need to be closed over if there is to be any further upside. Such a move would only green light a slingshot leg higher to the 13s around 47.03 WTI; 48.52 Brent; 146.11 Heat; 145.42 RBOB; and 429.50 Gasoil. The 8 and 13s are dangerous – be careful at them. The next few hours are likely to test the resolve of this recent leg higher. Watch the s/t MAs for guidance.

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Posted by Stephen Brennock

Stephen Brennock joined PVM in 2013 after having worked as a project manager for a business development firm. He graduated with a degree in Business Management in 2007.