WTI crude oil futures fell sharply lower to 79.80 despite EIA reporting a record crude oil draw of -17.049Mbbls from over $82 after API announced a -15.4Mbbls draw. The risk off mood after Fitch downgraded the U.S.A. from AAA to AA+ and the larger than anticipated refunding pushed Treasury rates higher worrying demand structures. One also wonders how much that has to do with last week’s huge EIA adjustment factor? Last week EIA reported US crude oil inventories fell 0.600Mbbls. However, the “adjustment” factor was a record at 2.415m b/d. Gives more doubt on the EIA data.
WTI closed last week over $80.00 in a weak of volatility in risk markets with central bank meetings and big data. We saw lower second quarter earnings across the big oil board. Exxon Mobil (XOM) Chevron Corp (CVX), Shell (SHEL) and TotalEnergies (TTEF) have reported profit falls of 56%, 48%, 56% and 49%, respectively.
WTI futures closed Friday $80.58 up 4.55% for the week after rising 2.2% the week prior. The current futures move began when it bounced off its 50-day moving average (71.29) last week through resistance from near its 200-day moving average (77.18).
The key commodities ignored weak data out of China that almost routinely triggered more calls for more policy stimulus. The energy complex closed the week with WTI futures up 4.55% for the week after rising 2.2% the week prior. Gasoline up 5.12% after rising 5.84% the week prior, Brent rose +4.69% after rising ++0.93% the week prior, and heating oil rose +7.75% after rising +5.64% the week prior. (Prices w/w at 16:00 ET close)
Support includes a lower US dollar, Russian Energy Ministry confirming oil supplies cuts by 500K Bpd by cutting exports and the Department of Energy issuing a request for proposals to purchase barrels for the Strategic Petroleum Reserve. U.S. labor market continues its resilience in June with both the ADP and BLS reports underscoring the strength in the belly of the economy.
US CPI for June showed annual inflation decelerated to 3.0% from 4.0% in May which saw risk on asset buying supporting crude prices. Another positive sign for the oil market was the Exxon Mobil (XOM) $4.9 billion all stock deal to buy pipeline operator Denbury. One, it involved no debt and two and involved an oil major taking a lead in energy transition which satisfied wider segments of the political spectrum and market.
Concerns on the global economy deepen with the aggressive Central bank hiking as we saw with the weak global PMIs reports.
Around The Barrel Contents
Click on the links below to navigate to the relevant section.
- DOE & API Petroleum Storage Forecast Matrix
- Crude Oil Quick Summary
- Weekly DoE US Petroleum Storage Report Breakdown
- API Crude Inventories
- Cushing Oil Stocks
- Crude Imports
- Crude Exports
- Gasoline
- Rig Watch
- Crude Oil Production
- Weather
- WTI Crude Oil Futures Technical Analysis
- DCOT Report
- Option Volatility and Gamma
- Key EIA and CME Dates
The risks of global recession threaten the demand picture and with higher rates push the likelihood of a meaningful recession higher. In 2023 the market has in the background the obtuse geopolitical framework framed by Russia’s Ukraine invasion, Germany’s inept energy policy, and Iran and China pursuing aggressive directions.
The Week Ahead
DOE Weekly Petroleum Status Report Forecast
- via TradersCommunity.com
- Report Date 7/28/23
- Release Date Wednesday August 2, 2023, at 10:30 A.M
Highlights
- Crude EIA -17.049M Exp -1.050M Prior -0.600M API -15.4M
- Cushing EIA -1.259M Exp -1.85 Prior -2.609M API -1.76M
- Gasoline EIA +1,481M Exp -1.550M Prior -0.786M API -1.68M
- Distillate EIA -0.796M Exp +0.100M Prior -0.245M API -0.512M
- Refinery Utilization -0.7% to 89.9.6% Exp +0.1%
- Production UNCH kbpd to 12,200kbpd (13.10 ATH)
- SPR release 0.000M (Lowest Since Aug 1983)
- NB: Crude oil supply adjustment 7/28/23 +497 w/w at 2.902mbpd – EIA
- US petroleum inventories (crude, SPR, refined products) fell by 10.439mb w/w to 1,612.818mb last week – EIA
The EIA reported US crude oil inventories fell -17.049Mbbls. Domestic US oil production unchanged at 12.2mbpd just off the highest level since 2020. The WTI Futures Hub at Cushing had another draw of -1.259Mbbls. Gasoline stocks rose +1,481Mbbls and distillate fell -0.796Mbbls in inventories. Refinery utilization fell 0.70%. Domestic US oil production unchanged at 12.3mbpd just off the highest level since 2020.
3.479M adjustment this week vs +17.052M last week a record of 2.415m b/d. Gives more doubt on the EIA data.
Previous week’s “adjustment” factor a record of 2.415m b/d. Gives more doubt on the EIA data.
Note in bbls *exp = Reuters poll estimates adjusted for API shift, except Cushing
Energy Price Matrix
US Crude Oil Quick Look
Oil prices continue to be subject to geopolitical bifurcation dynamics with sudden changes that accompanies the onset of chaos. The unexpected knock-ons continue with imperfect bifurcation with political influence and personal vagaries from world leaders such as Putin, Scholz and Biden in addition to routine crude dynamics.
Final 2022 Inventory
- Commercial crude oil inventories were up ~2.8m bbls
- SPR inventories were down ~ 221.3m bbls
- Gasoline inventories were down ~10.1m bbls
- Distillates were down ~6.5m bbls
- Jet Fuel inventories were down ~0.9m bbls
- Propane was up ~14.5m bbls
Weekly DoE US Petroleum Storage Report Breakdown
Weekly Storage via DOE
with RonH Data @Ronh and The Fundamental Angle @BrynneKKelly
Via RonH at Ron H Public Tableau Link
API Crude Oil Inventories
US petroleum (Crude, SPR, oil products) inventories in million barrels (EIA)
Note June 8: US Department of Energy (DoE) plans to issue a new solicitation to purchase an additional 3 million barrels of crude oil for the strategic stockpile. These barrels are scheduled for delivery in September. In August, the DoE awarded contracts for the purchase of 3 million barrels of crude oil for the Strategic Petroleum Reserve (SPR) at an average price of $73 per barrel.
US petroleum inventories (crude, SPR, refined products) fell by 10.439mb w/w to 1,612.818mb last week – EIA
US total crude oil inventories (both commercial and the Strategic Petroleum Reserve) have fallen to a 36-year low, dropping below the previous bottom set in 2001 via Bloomberg
- US crude stocks In SPR lowest since August 1983.
- We saw -no Mbbls taken from the SPR into the crude oil market.
US SPR crude inventories – 1.4mb w/w at 348.6 million barrels the lowest since Oct 1983
- Sour unchanged w/w at 203.2mb
- Sweet -1.mb w/w to 145.4mb
Cushing Oil Stocks
Cushing, OK is the hub for the most heavily traded US oil Futures contract – West Intermediate Crude – WTI so for that reason we pay special attention to the storage there.
API Cushing Stocks
Weekly Update via RonH Data @Ronh999
Net available tank shell storage tank capacity in Cushing stands at 98.695mb as of March, up 514kb y/y
Closer Look at Cushing with DigStic Data @DigStic
US Oil Import Export
Imports
US crude imports by origin in kbpd (incl. w/w changes)
- Canada -495 to 3203
- Mexico -174 to 830
- Saudi Arabia -184 to 242
- Colombia +72 to 287
- Iraq +14 to 273
- Ecuador +9 to 216
- Nigeria +138 to 229
- Brazil -141 to 216
- 7/26/23
Exports
The tightening of the Dubai differential to WTI +the weakish WTI/Brent spread has served to increase US exports of WTI to Asia & the EU. (France & Netherlands) Exports were an extraordinary 5.338 mbpd. And while distillate demand here is lackluster, exports were on fire @1.496 mbpd
via Patricia A Hemsworth @phemsworth
US crude exports surged in March according to US Customs data.
Exports to Asia hit 2MMBD for the first time as China took in almost half of those volumes. Exports to China have been depressed since 2020 and they have surged for the first time since then. @OilyticsData
The Russia, India and China mix
Russia said they would cut production by 500kbbls in March just as Russia launched its heaviest bombardment on southern Ukraine since the start of the war, as officials warned Moscow’s major offensive had ‘definitely’ started. There is a clear use of oil as a weapon by Putin. India and China being Russia’s main customers are not filling the demand void. Not hard to join the dots.
EU’s sanctions on Russian refined products were implemented Feb. 5. The ban follows a similar price cap on crude shipments introduced last year. European countries have pushed to lower the crude price cap ($60) on Moscow even further, but the Biden administration said it was inclined to oppose the move.
Futures have been ignoring large US builds and have chosen hope with China opening up rather than negative morose from China’s economic implosion and the Central Bank maelstrom. Europe has been addressing energy dependance on Russia since the Ukraine invasion. President Vladimir Putin said Russia would immediately stop oil supply to countries that support the G7 members price cap on exports of Russian oil.
Since the cap, if not before Russian exports have been redirected to India and China in particular. Russian crude exports into India rose by 260kbd m/m in December to a record 1.2mbd. January exports are on-track to nearly 1.3mbd of Russian crude. Russian Exports to China were 70kbd in December, down nearly 27%m/m. We have seen Malaysia increase exports well beyond its own output to China. In turn China has exported products such as distillates back to Europe.
US Gasoline Consumers
Input to Refineries
Update: PADD 3 Refinery Utilization
US consumers bought 371.2 million gallons of gasoline per day last week. That is +12.5 mil YoY.
US consumers spent $1,394.6 million dollars per day for gasoline last week. That is $-109.2 mil YoY
US avg retail price for gasoline was $3.757 last week. That is -0.435 YoY.
Rig Watch
Baker Hughes Weekly North American Rigs Report
- US Baker Hughes Rig Count Jul 28: 664 (prev 669)
- Rotary Oil Rigs: 529 (prev 530)
- Rotary Gas Rigs: 128 (prev 131)
US Oil Rigs w/w changes by key shale basins
- Permian +1 to 324
- Eagle Ford -2 to 55
- Williston -1 to 34
- Cana Woodford unchanged at 22
- DJ Niobrara unchanged at 14
US oil rigs and frac spread (Baker Hughes/Primary Vision)
Canada Rigs
- Canada’s weekly rig count at 173 July 14, 2023
- Canada’s active rig count declined slightly this week, settling at 173 compared to 180 on July 7. This 3.9% decline is the first we’ve seen in weeks and, given trends from previous years, will likely be followed by activity increases in the near future.
- The week’s peak was 189 on July 10, continuing a pattern of activity lulls as the weekend draws nearer.
- Activity was down across Alberta, BC, and Saskatchewan, with Saskatchewan’s decline of 4 rigs standing out as the most significant.
- Oil rigs were responsible for most of this week’s decline. There were 102 active oil rigs this morning compared to 108 on July 7, while there were actually 2 additional gas rigs compared to last week. The number of rigs classified as “unknown” or “other” dropped to 9 from 12 on July 7
- Today’s rig utilization rate is 42.6%, a very slight decline from 42.7% on July 7. The total number of rigs declined from 421 on July 7 to 406 today, suggesting a decrease in available rigs as well as rig activity.
- BOE Report
International oil rigs ex North America
International oil rigs ex North America -4 m/m to 735 in June via Baker Hughes
- Norway +6
- Mexico +3
- UK, Algeria, Argentina, Brazil +2
- Vietnam -2
- Abu Dhabi, Kuwait -3
- Indonesia -5
- Baker Hughes
US Oil Production
US crude production changed benchmark April 12, 2023: US oil production: This week’s domestic crude oil production estimate incorporates a re-benchmarking that increased estimated volumes by 105,000 barrels per day, which is about 0.9% of this week’s estimated production total.
US Oil Field Production UNCHkbpd at 12.20mbpd (New Benchmark adj)
OPEC Crude Oil Production
OPEC+
June OPEC+ meeting agenda
OPEC+ meeting had some angst early with African nations wanting a change to baseline. The resolution was Saudi Arabia said Sunday it will make an additional voluntary cut of 1Mbbls of crude oil starting in July as a temporary measure initially. That came with the press conference, OPEC+ also said in a statement it will keep official production targets unchanged for the rest of this year and limit combined oil output from January-December 2024 to 40.46M bbl/day. Saudi production would be down to 9Mbbl/day, which would be its lowest output level since June 2021. In 2024 they will change they may lower with KSA taking a voluntary cut depending on baselines
- Saturday OPEC ministerial meeting starting at 13:00 CET
- Sunday OPEC+ JMMC starting at 11:00 CET
- Sunday OPEC+ ministerial meeting starting at 12:00 CET
Heading into the June 4 OPEC+ meeting OPEC’s crude oil output fell 0.5m b/d last month (BBG survey) to 28.26m b/d, a 15-mth low. Cuts from key GCC producers being partly offset by increases from members without or those pumping below quota, most notably Angola (60k b/d), Iraq (80k b/d) and Nigeria (180k b/d) @Ole_S_Hansen
Weather Watch
Gulf of Mexico
WTI Crude Oil Futures Technical Analysis
via KnovaWave @KnovaWave
US Crude Oil (WTI)
Daily: WTI Crude Oil tested the 77.50 (near 200dma) and option confluence back through the minor pennant resistance. The move comes after the sharp spillover emotive wave up week creating a clear break over the 50 dma, Kijun and Tenkan kiss of life. The move up came after completing the correction in 3 wave from gap fill and fail of the daily bull flag back in Oct/Nov. For bulls needs to break above those descending levels for higher. We are in a completive mode with this impulse, it’s a question of degree on the topside, use the Murrey math 240/60 grid. From there down in 3 waves, completing a C or IV? Support is previous lows. The bear case is the high was a complete 5.
Weekly: WTI crude Oil futures simply gathered downside momentum since it spat the key 61.8% with impulse, having plunged more than $60 off the June highs. WTI was never able to take on its sphere of influence which is causing resistance now as it has bounced off the double bottom through Kijun. The overhead is 50wma for the upside. Recall WTI completed 3 waves and spat the 50wma after the since filled OPEC+ gap up underscoring its weakness. Recent lows underscore the support, no less than 5 times since April 2021. Risk support is the grid. Long term 61.8% target fueled the spit of a spit by after rebalanced Chikou sated. Resistance 50wma, Support Weekly Kijun, tenkan, cloud and Murrey Math levels and previous breaks (off monthly). Bear case is Wave 5 complete.
The key is crowd behavior to help tell the story which in energy is often around geopolitics. A great example of why we watch ABC corrections and from here we get the energy from the break being balanced. This move that was powered by 50 dma Tenkan spit of a spit – hence the fractal energies reverberations.
These are special times, recall “After we regained the pattern 261.8% from the extreme (-$40) move. The climax of the larger acceleration lower after broke the weekly uptrend, a fractal of the sharp and all the way to all-time lows to negative pricing we have seen mirror replications.” Above we have Murrey Math time and price
What we broke…….
Crude Oil in the past quarter built a huge bull flag. We watch if the recent break was false, or we fail. Very clear pattern.
The focus remains 85.61-88.01 a region defined by the 2013 low, the 100% extension of the March decline and the 61.8.% retracement of the November advance. A break below opened up the objective 2020 yearly open and 2018 high at 75.35-76.87 which gave away and has held on to attempts to get above. This is an area of interest for downside exhaustion and price inflection potentially.
Crude Oil Futures Commitment of Traders
Latest ICE and CFTC Open Interest Data:
CTFC and ICE open interest:
Money managers increased their net-length in Brent crude oil futures and options by 3,944 contracts to 196,640 in the week ending July 25 via ICE
- Long-only positions rose by 7,477
- Short-only positions rose by 3,533
- other reportables net-length rose by 21,458
Money managers increased their net-length in WTI crude oil futures and options by 18,820 contracts to 192,104 in the week ending July 25 via CFTC
- Long-only positions fell by 989
- Short-only positions fell by 19,809
- other reportables net-length rose by 4,240
Chart: Crude net-positioning of non-commercial accounts (=managed money and other reportables) in barrels and in US dollars (Brent and WTI futures and options combined) latest value is July 11, 2023
COT on Commodities
COT in Oil Complex week to June 20: COT showed 19k lots of net crude oil buying led by Brent (16k). The comb. long at 297k lots was within the recent range, but during this time positions have increasingly been moved to Brent (+84k) at the expense of WTI (-53.4k). Gasoil buying lifted the net to a two-month high at 16k lots via Ole S Hansen @Ole_S_Hansen
Money managers in commodities covering the week to June 20: COT on commodities showed leverage accounts focus their buying interest on grains, copper, crude oil, natgas and sugar via Ole S Hansen @Ole_S_Hansen
via Ole S Hansen @Ole_S_Hansen
Understanding DCOT Reports
Read Understanding Commitments of Traders Reports – COT, TFF and DCOT to help understand the disaggregated reports (DCOT) and how they break down the reportable open interest positions into four classifications:
1. Producer/Merchant/Processor/User 2. Swap Dealers 3. Managed Money 4. Other Reportables
Crude Oil Option Volatility Watch
The sharp move in WTI to $63 in May and then rebound came after ten-day volatility in oil rose the highest level since October as crude sank for a third week. It gives a good indicator of complacency and optionality out there in slow price ranges. API reported big product draws which is supportive for the cracks. The contango structure and inflation having cooled from its recent peak, but remaining stubbornly elevated adds a volatile dynamic around settlements. The US regional banking disaster filtered through to commodities such as oil, copper and natural gas.
Ten-day volatility in oil jumped to the highest level since October as crude sank for a third week.
via commodityvol.com
NYMEX LO = Crude Oil Options First 3 Months (Live Link)
NYMEX LO & ICE North Sea Brent BRN Crude Oil Options (Live Link)
NYMEX LO NYMEX OH NYMEX OB Options (Live Link)
NYMEX LO NYMEX OB Options (Live Link)
Energy Earnings Highlights for Q2 2023
Major oil companies reported Q2 earnings:
Lower earnings have been across the big oil board. Exxon Mobil (XOM) Chevron Corp (CVX), Shell (SHEL) and TotalEnergies (TTEF) have reported profit falls of 56%, 48%, 56% and 49%, respectively.
The three major oil services companies all reported Q2 earnings:
Key EIA and CME Dates for WTI Crude Oil
Key EIA and CME Dates For WTI Crude Oil
From The TradersCommunity US Research Desk