Energy Prices Get Support From Many Avenues
July 19, 2023
Energy prices were higher yesterday as China said they will act to support their economic growth. The thought that the Fed will also halt interest rate hikes after July is also supportive and the news that US shale oil production is forecast to fall in August was also all supportive. The US dollar index remains news. A 16-month low is also providing support to the energy markets.
The average estimates for the DOE inventory update from the Bloomberg survey is for crude oil stocks to be down 2.381 million barrels, gasoline inventories down 1.929 million barrels and distillates up 275,000 barrels.
The API estimates sent out yesterday called crude oil down 800,000, gasoline down 2.8 million, and distillates down 100,000.
The market did manage to trade higher and are testing the upper limit of the range, but it is currently overdone to the upside. This could lead to the bulls finally breaking the market out and opening room for the market to go higher or prices could sell off creating failure into resistance and then correct lower. Traders will be watching to see how these things play out over the next few days.
The average estimate for the propane inventory report update today is for stocks to build 2.45 million barrels.
The global head of commodity research at Citigroup, Ed Morse, said oil is unlikely to fall below $70 per barrel but it would take a wild card even to push prices above $90 per barrel. He said Brent crude prices are finding support near $70 due to several fundamental factors, with OPEC+ seeking to limit prices from falling below that level by cutting production and the US commitment to refilling its SPR with price around $70 per barrel. He said that while oil is unlikely to increase over $90 per barrel with supply tightness factored in, extreme weather events, including hurricanes, could change that outlook. He also added that obstacles to invest in fossil fuels and lower demand are leading to more market volatility.