US-China Expected to Sign Trade Pact Today
January 15, 2020
The inventory report put out by the API said that crude oil stocks were up 1.1 million barrels and the crude stocks at Cushing, Ok were down 69,000 barrels. Gasoline stocks were up 3.2 million barrels and distillate stocks were up 6.8 million barrels .
The average estimates from the Reuters survey are calling crude down 474,000 barrels, gasoline up 3.4 million barrels and distillates up 1.2 million barrels.
Here are some key points from the EIA’s Short-Term Energy Outlook. US crude oil production averaged 12.2 million bpd in 2019, up 1.3 million bpd from 2018. The forecast from the EIA for production is 13.3 million bpd for 2020 and 13.7 million bpd for next year. Most of that growth is called to come from the Permian Basin. Global supply is called up 1.6 million bpd by the EIA and oil demand up 1.3 million bpd keeping their outlook the same that the world will be slightly oversupplied in 2020.
Reuters reports that US oil output growth is expected to slow over the next five years, likely prompting oil majors to gobble up smaller shale oil producers, Mark Papa, non-executive chairman of Schlumberger, told Reuters. He also said, “I’m not saying that the US shale oil will go way but I’s saying it will become a less powerful force as we go through the 2020s than is was I the previous decade.
A report originally had come out that OPEC+ may decide to postpone its March meeting until June which would extend the current agreement. Russia and the UAE have rejected this report and stated that the meeting will remain in March.
President Trump and China’s Vice Premier Liu He are expected to sign phase-one trade deal today. The details of the deal are supposed to be released shortly thereafter. This could produce some headlines that impact commodities.
The market has so far held support but at some point, sooner rather than later support should trigger a rebound. If the bulls have hopes of continuing the seasonal advance, they need to stage a rebound. If they cannot and support breaks, then the market is in for another round of selling that likely takes it down to the next level of support and the bulls will have to stage around from there to suggest the market is still into a seasonal advance. In big round numbers support for crude is $56-$55 and then below that $50 level. RBOB and ULSD have support about $0.05 cents lower, RBOB $1.60 ULSD $1.84.