Seasonal Factors Weigh on the Market
September 7, 2021
On Friday, the Baker Hughes Rig Count had oil rigs down 16 to a total of 394. Last year at this time oil rigs were at 181.
The market rallied up as traders were buying to cover more upside risk as the market continues to test higher as bullish optimism returns. As the day wore on the market pulled back and settled lower on the day and lower for the week. We should see more of the same this week as volatility continues to be high as the market works to determine the next trend.
Seasonal factors could weigh on the market as this is the time of year when prices can see a correction lower as the driving season come to an end. A majority of traders seem to see more upside for the next couple of months before they turn bearish looking at 2022. This outlook in my opinion is driving by the fact that we may see this market in a supply defect through the end of the year but that turns into a supply surplus as we turn the calendar and move into a new year.
The recovery for refineries is facing challenges as they lack crews, power, and fuel limiting the progress. Reports have said that at least three refineries in Louisiana were starting to get some power supplies and that would enable them to consider restarting. Some traders are concerns that already low inventory levels continue to get drawn down as refineries slow try to get back up and running. The White House sought to ease regional shortages and authorized the release of 1.5 million barrels of crude oil to Exxon Mobile to produce gasoline.
The US Bureau of Labor Statistics reported Friday the only 235,000 new jobs were created in August, which was a big miss from the 740,000 new jobs expected by economists. COVID-19 was getting the blame for this poor jobs number as hiring in the travel and entertainment business decreased. This report and other economic data are indicating the potential for some slowdown in the global recovery.
Total gasoline stocks increased by 1.3 million barrels last week and are 2% below the five-year average. Distillate inventories decreased by 1.7 million barrels and are 9% below the five-year average. Propane inventories increased by 500,000 barrels last week and are 20% below the five-year average.
Saudi Arabia lower their official selling price for October crude oil to its Asian buyers by at least a dollar per barrel. This price cut was blamed on lower demand from Asia due to lockdowns to control the COVID-19 Delta variant.