Crude Oil Price Analysis for August 16, 2017

Crude oil prices edged higher on Tuesday ahead of the inventory reports released by the API and the DOE.  Saudi Arabia has been reducing exports, which is keeping traders on their toes, and helping to buoy prices despite the recent downward pressure. Stronger than expected retail sales lifted the U.S. dollar which weighs on crude oil prices on Tuesday.

Technicals

Crude oil prices rebounded from session lows after testing the 47 handle and notching up an August low at 47.02.  Prices rebounded back to resistance which was former support that is an upward sloping trend line that comes in near 48.  Additional resistance on crude oil is seen near the 10-day moving average at 48.89. Momentum has turned negative as the MACD (moving average convergence divergence) index recently generated a crossover sell signal. This occurs as the spread (the 12-day exponential moving average minus the 26-day exponential moving average) crosses below the 9-day exponential moving average of the spread.  The index moved from positive to negative territory confirming the sell signal. The MACD histogram is printing in the red with a downward sloping trajectory which points to lower prices for crude oil.

Inventories have Been Mixed

U.S. oil inventories in August, have been a mixed bag when compared to the last five years. While record refinery runs and rising exports are helping to draw stocks this summer, flows from Saudi Arabia and Venezuela remain very much in focus on the import side of the equation.  As Saudi Arabia cuts flows to the U.S., this supply drop is generating lower deliveries to Port Arthur. Saudi Aramco’s Motiva refinery at Port Arthur has imported approximately the same number of barrels as last year.

While arrivals were in line with the total Saudi Arabian deliveries to the U.S.,  imports over the last four months have averaged 157,000 barrels per day, considerably lower than the 216,000 barrels per day seen over the same period last year.

Import Prices for Petroleum Were Flat

U.S. import prices rose 0.1% with export prices up 0.4% in July. The 0.2% declines in June import and export prices were not revised. For import price components, petroleum prices rebounded 0.7% from -2.9%. Excluding petroleum, import prices were flat from 0.1%. Capital goods prices edged up 0.1%, while industrial supplies prices dipped 0.1%. Import prices with China were up 0.1% from -0.1% and were up 0.6% with Canada from -0.2%. For export prices, agricultural prices climbed 2.1% from -1.4%. They were 0.3% higher excluding ag from unchanged previously.

Canada’s Existing Home Sales Declined

Canada existing home sales fell 2.1% in July compared to June, marking the fourth straight monthly decline in seasonally adjusted home sales. Actual (not seasonally adjusted sales 11.9% year over year in July. New listings declined 1.8% month over month in July, led by the GTA. CREA notes that new supply in many other markets in the Greater Golden Horseshoe region has declined recently after popping higher immediately after the Ontario government announced fresh housing sector regulations in April. The MLS HPI grew at a 12.9% year over year pace in July, slowing slightly from the June rate. The national average sales price slipped 0.3% year over year in July.

U.S. Empire Manufacturing Surged

U.S. Empire State manufacturing index surged 15.4 points to 25.2 in August, more than double than was expected, after dropping 10.0 points to 9.8 in July. This is the highest going back to September 2014. The employment component almost doubled to 6.2 from 3.9, while the workweek surged to 10.9 from unchanged. New orders climbed to 20.6 from 13.3. Prices paid rose to 31.0 from 21.3. Prices received were 6.2 from 11.0. The 6-month outlook rose to 45.2 from 34.9, with employment at 9.3 from 11.8.

Retail Sales Where Stronger than Expected

U.S. retail sales bounced 0.6% in July, with the ex-auto component rising 0.5%, both better than expected. Also, the 0.2% headline June decline was revised sharply higher to 0.3%, while the -0.1% May print is now unchanged. The June -0.2% ex-auto print was nudged up to 0.1%, while the -0.3% from May was bumped up to -0.2%. Sales excluding autos, gas and building materials climbed 0.5% from a 0.1% gain. Gains were rather broad-based. Motor vehicles and parts sales surged 1.2%, with building materials rising 1.2%. Miscellaneous sales bounced 1.8%. Non-store retailers climbed 1.3%. Furniture sales rose 0.4%. Gasoline station sales dipped 0.4%, with electronics off 0.5% and clothing down 0.2%.

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