The petroleum complex traded quietly today on both sides of unchanged. Fresh news was generally lacking as summer holidays set in. The market continued to reflect on both the IEA and OPEC reports of the past few days, with declining inventory levels in the US creating optimism that it reflects a rebalancing of inventories and better demand. The Price Monitoring Committee video-conference was postponed by one day to August 19th. Expectations for the meeting appear to suggest that production cuts from OPEC+ members of 7.7 mb/d and an additional cut of .4 mb by Iraq will be maintained through the third quarter. Ideas that the market has moved closer to balancing inventories as economies open up continues to provide comfort to crude producers in light of the recent strength to values. Nevertheless questions remain over global demand given the impasse in Washington over new stimulus measures and the possible revival of COVID-19 infections into the fall.
The rally was reignited today with September making an intraday peak at 2.379 before settling the week higher by 17 1/2 cents at 2.356. The move seemed to pick up steam when Tuesday’s high near 2.23 was violated, and additionally at 2.275, which was Monday’s top, on likely stop-loss orders. Major fundamental improvements could not be pointed to for the move. The storage report yesterday pegged the build at 58 bcf, slightly above expectations, while production remained steady and weather revisions actually decreased CDD expectations for the two week outlook. Speculative buying has likely been a major driver, while the key fundamental factor being used to justify the strength is expectations for a major improvement in the LNG market as we work through the fall. Asian and European prices have outpaced the US strength, as some improvement does appear to be brewing for US LNG cargos. With the 2.30 target reached today, the market likely tests 2.40 early next week, with the 2.60 level a possibilty if we mirror the strength of last weeks spike higher move. The 2.27 area should offer support on any retrenchment.
Charts Courtesy of DTN Prophet X, EIA, Reuters.
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