Outlook: Sharp losses to start the week after OPEC+ was able to overcome recent disputes and agree on a production increase scheduled to begin in August. OPEC and its allies agreed to increase production by 400,000 bpd each month through the end of the year. The group also plans to steadily end oil production cuts by September 2022. Both the WTI and Brent benchmarks have fallen by over 3% this morning as markets now expect a moderate addition of oil supply from OPEC+ countries. Additional weakness stems from a strengthening U.S. dollar. The U.S. dollar was seen hitting its highest level since April 5th, while crude oil fell to its lowest level since April 10th. Analysts are now debating whether or not OPEC’s supply increase will end the up cycle for energy prices. Delta variant issues also remain and place further downward pressure on both energy and equity markets. Despite this sharp correction in prices, several investment banks stick with their forecasts that include demand outstripping supply, prompting $80 prices for Brent.
Crude
- According to data from JODI, Saudi Arabia’s crude exports for the month of May rose to 5.649 million bpd, the highest level seen in four months.
- The recent OPEC+ deal will allow for UAE to increase its baseline from 3.17 million bpd to 3.5 million, starting in May 2022.
- The amount of crude oil held on tankers around the world fell to 87.97 million barrels as of July 16, compared to 95.88 million on July 9.
- The August crude oil contract is trading $2.51 lower at $69.30. The 20-day and 100-day moving averages are $72.57 and $65.08 respectively. The 14-day RSI is 41.37%.
- As of 8:30 am CST: August Brent is down $2.47 at $71.12, the U.S. dollar index is 0.011 higher at 92.698 while the nearby e-mini S&P 500 futures contract is down 53.25 points at 4265.25.
Diesel
- China’s diesel exports in June were more than double of that from the same period a year ago due to record refinery production. Diesel shipments soared higher to 2.36 million tonnes vs 1.68 million tonnes in May.
- The August ULSD contract is trading $0.0603 lower at $2.0530. The 20-day and 100-day moving averages are $2.1349 and $1.9828, respectively. The 14-day RSI is 40.69%.
Gasoline
- China’s gasoline shipments for the month of June were seen falling to their lowest level in six months due to tightening export quotas. The shipments were seen at 403,583 bpd, down by 3% from the month prior.
- The August RBOB contract is trading $0.0683 lower at $2.1853. The 20-day and 100-day moving averages are $2.2361 and $2.0530, respectively. The 14-day RSI is 44.50%.
Propane
- Propane has been seen increasing in relative value to crude as prices attempt to hold onto gains as crude markets tumble lower. While last week prices were seen decreasing, this increase in relative value seems to point to supportive fundamentals.
- At last look, Conway propane was down $0.02000, trading at $1.07750. Mt. Belvieu was down $0.02000, trading at $1.09250.
Natural Gas
- Overnight the Earthstat Weather Model added 4 Cooling Degree Days over the next two weeks due to above average temperatures.
- The August Natural Gas contract is trading $0.082 higher at $3.756. The 20-day and 100-day moving averages are $3.569 and $3.054, respectively. The 14-day RSI is 67.84%.
In 2020, the U.S. was again seen leading global petroleum and natural gas production, a trend that has been intact since 2014.
| As of 8:30 AM CST | WTI August | ULSD August | RBOB August | Nat Gas August |
|---|---|---|---|---|
| CONTRACT HIGH | 71.00 | 2.3175 | 2.2170 | 4.720 |
| RESISTANCE | 75.00 | 2.1877 | 2.2855 | 3.820 |
| PREVIOUS CLOSE | 71.81 | 2.1133 | 2.2536 | 3.674 |
| GLOBEX-CURRENT | 69.30 | 2.0530 | 2.1853 | 3.756 |
| SUPPORT | 70.00 | 2.0376 | 2.1616 | 3.520 |
| CONTRACT LOW | 6.50 | 0.6724 | 0.5189 | 1.521 |
