Goldman Sachs: Oil Rally Unsustainable Without Actual Disruption
January 9th, 2020
The DOE inventory report showed that crude oil stocks were up 1.1164 million barrels. Gasoline stock were up 9.137 million barrels and distillates were up 5.33 million barrels. The crude oil stocks at Cushing, Oklahoma were down 821,000 barrels. The builds on crude, gasoline and diesel that were bigger than the expectations helped add to the bearishness of the market yesterday.
Propane inventories declined 699,000 barrels with the Midwest stocks down 606,000 barrels and the Gulf Coast stocks up 1.222 million barrels. Total propane stocks are now at 88.885 million barrels compared with last year at this same reporting week at 68.746 million barrels some 20.145 million barrels more. The vast majority of that excess is in the Gulf at 19.9 million more barrels than last year and the Midwest is 917,000 barrels less than last year.
The energy market sold off hard yesterday in a serious round of profit taking helped by bearish inventory report. After President Trump comment yesterday, it appears that both countries are stepping back, and many reports indicate that the current situation has reached its climax. Some relative calm over the market would be nice but trades will stay on alert as we cannot say that all of this is over. The Middle East is always a wild card and very had to predict. The market has corrected a large portion of the run up it has taken over the last month and half. At this point the lows from early December are likely the key level of support that the bears much take out to have a chance to see this market move much lower. The bulls have a pretty good cushion and will all the concerns in the market the downside is move is likely doesn’t have a lot more room to run. With no other escalation of events in the Middle East the market will likely get congested at some level and trade sideways to mart time and look for the next event.
Iran’s Supreme Leader, Ayatollah Ali Khamenei, said the US should withdraw from the region and said Ian’s missile attacks on United States targets in Iraq were “a slap in on the face” for America. He said the US is Iran’s enemy.
Goldman Sachs said the recent rally in oil prices is unsustainable without an actual supply disruption. It maintained its three-month forecast of oil at $63 per barrel.