CRUDE OIL

WTI Crude Oil is Heading South Because Itís JULY!!!

Witawat (Ed) Wijaranakula, Ph.D.
Wed Jul 13, 2016

The WTI crude oil spot price tumbled 3.24% on Wednesday, closing at $45.11 per barrel, while the Brent crude price took a 3.3% nosedive to close at $46.62 per barrel, following bearish reports from the International Energy Agency (IEA) and the Energy Information Administration (EIA).

The IEA said on Wednesday that there are warning signs that global oil demand is ebbing while oil stocks remain at "elevated levels," threatening a rebalancing act in the oil markets. The Paris-based agency also said the volume of oil in storage on oil tankers worldwide reached 95 million barrels at the end of June, the highest since the 2008 to 2009 recession. 

Nine tankers holding about 9 million barrels of the major North Sea crude grades are floating off the U.K.ís coast, up from 7 million in May, according to a survey of oil traders and ship-tracking data compiled by Bloomberg. 

The EIA weekly U.S. oil inventory report on Wednesday showed a decline of 2.5 million barrels to 521.8 million barrels in the week ending July 8, compared to S&P Global Platts analystsí expectations for a drawdown of 3.25 million barrels. The American Petroleum Institute (API) inventory data on Tuesday showed U.S. crude inventories increased 2.2 million barrels for the week. 

The shocker was the EIA report of a massive build last week in U.S. gasoline and distillate stockpiles of 1.2 million barrels and 4.1 million barrels, respectively. Analysts were expecting a decline of 125,000 barrels for gasoline and a rise of 375,000 barrels for distillates.

Separately, the EIA said the weekly U.S. crude oil production decreased by 57,000 bpd for the week ending July 8, 2016, to 8.485 million barrels per day (bpd). Weekly U.S. crude oil output has fallen about 11.71% from the peak level of 9.61 million bpd during the week ending June 6, 2015. 

Technically, the WTI crude price is bouncing around $44.32 per barrel, or the 50.0% Fibonacci retracement level. It will most likely move downward to test the $40.00 per barrel level, or 38.2% Fibonacci retracement, due to soft demand. The EIA just cut U.S. oil demand on Tuesday to 160,000 bpd in 2016, compared with previous expectations for 220,000 bpd. If the $40.00 level canít hold, the next support is $34.67, or the 23.6% Fibonacci retracement level.

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