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Crude Oil Price Analysis for October 13, 2017

By:
David Becker
Published: Oct 12, 2017, 17:47 UTC

WTI futures are down 1.3% at 50.58, following a mixed inventory report from the DOE. The Weekly API data showed a 3.1 million barrel rise in U.S. stocks

Crude Oil

WTI futures are down 1.3% at 50.58, following a mixed inventory report from the DOE. The Weekly API data showed a 3.1 million barrel rise in U.S. stocks in the last reporting week, which sparked the correction, offsetting threats from Trump to impose sanctions on Iranian oil, and possible supply disruptions in Venezuela. The EIA reported that Demand for distillates remains positive, but has slipped from a more than 14% year over year increase to nearly 3%, following warmer than normal weather in the beginning of the autumn. Imports rebounded this past week, but are down this month on a year over year basis.

Technicals

Crude oil prices moved lower but held near the 10-day moving average at 50.52. Support is seen near the October lows at 49.10. Resistance is seen near the May highs at 52.05. Momentum on crude oil is neutral as the MACD (moving average convergence divergence) index prints in the red, with a flat trajectory which reflects consolidation.

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Imports Rose in Latest Week

According to the EIA, U.S. crude oil imports averaged over 7.6 million barrels per day last week, up by 403,000 barrels per day from the previous week. Over the last four weeks, crude oil imports averaged over 7.4 million barrels per day, 6.6% below the same four-week period last year.

Inventories Were Mixed

Inventories were mixed and crude oil inventories declined more than expected. The Energy Information Administration reported that U.S. commercial crude oil inventories decreased by 2.8 million barrels from the previous week. The draw was offset by a gasoline build. Gasoline inventories increased 2.5 million barrels last week, more than expected. Distillate fuel inventories decreased by 1.5 million barrels last week and are in the lower half of the average range for this time of year heading into the heating season. Total commercial petroleum inventories decreased by 2.9 million barrels last week.

Demand Remains Strong

Demand remains robust. Total products demand over the last month averaged over 20.2 million barrels per day, up by 1.3% from the same period last year. Over the last month, gasoline demand averaged over 9.4 million barrels per day, up by 1.3% from the same period last year. Distillate fuel demand averaged over 3.9 million barrels per day over the last four weeks, up by 2.1% from the same period last year.

U.S. crude oil refinery inputs averaged over 16.2 million barrels per day during the week ending October 6, 2017, 229,000 barrels per day more than the previous week’s average. Refineries operated at 89.2% of their operable capacity last week. Gasoline production increased last week, averaging over 10 million barrels per day. Distillate fuel production remained virtually unchanged last week, averaging over 4.9 million barrels per day.

Canadian Inflations Slipped

Canada’s Teranet-National HPI slipped 0.8% month over month in September following the 0.6% gain in August. The pull-back follows a run of monthly increase stretching back to February of 2016, with January of 2016 and December of 2015 seeing 0.1% month over month declines. The annual growth rate slowed to 11.4% from the 13.1% year over year rate of increase in July.

Canada’s new home price index grew 0.1% month over month in August. Prices were steady in 15 of the 27 census metropolitan areas that Statistics Canada calculates, which includes Toronto and Vancouver. The new home price index grew 3.8% year over year in August. Vancouver grew 7.8% year over year, matching the growth pace in July. Toronto home prices expanded 6.7%, but that is down from the 9.9% year over year rate in April that was the best for the year.

U.S. Wholesale Prices Climbed in September

U.S. headline PPI climbed 0.4% in September, with the core up 0.4% as well, with the latter a little hotter than forecast. There were no revisions to August data that showed a 0.2% overall rise, with the ex-food and energy component up 0.1%. The annual pace rose to a 2.6% year over year clip versus 2.4% year over year previously, with the core at 2.2% year over year versus 2.0% year over year. For some details, goods prices increased 0.7% versus 0.5% in August, led by energy which climbed 3.4% compared to 3.3% previously, while food prices were unchanged from -1.3%. Services prices edged up 0.4% from 0.1%, paced by transportation/warehousing which rose 1.0% following the prior 0.3% gain, while trade was up 0.8% versus unchanged previously.

About the Author

David Becker focuses his attention on various consulting and portfolio management activities at Fortuity LLC, where he currently provides oversight for a multimillion-dollar portfolio consisting of commodities, debt, equities, real estate, and more.

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