Oil Market Report: Last Week was a Bear

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Daily Settlement Prices

Oil prices ended a volatile week on a rather quiet note, settling marginally higher on the day and holding key support above $45. For the week, however, front month WTI was down over seven percent and currently sits at its lowest level in two months (and just above the aforementioned $45).

Since peaking near and trading to $50 a few times in June, WTI has struggled to maintain consistent direction amid a strengthening dollar and on some bearish fundamental news (increased OPEC oil production). Gasoline felt the brunt of last week’s sell-off, with RBOB losing over 14-cents (equivalent to six dollars per barrel). WTI has stayed in the $45 – $51 range since late April but is much closer to the bottom than the top, and a break through lower might signal a move towards $40.

Friday was extremely uneventful, and August WTI remained in a tight dollar range during the day’s session. WTI alternated up and down days during the week, though the down days were substantial while the up days were minor.

Given how oil sold off on Thursday, the day of the somewhat bullish Department of Energy report, it seems that we’ve entered a stage where bullish news is ignored and bearish news is highlighted. As such, any really bearish results could send the market through the $45 support level. On Friday, August WTI gained 27-cents to settle at $45.41.

RBOB and Heating Oil posted slight gains on Friday, but were down 14-cents (RBOB) and 10-cents (HO) for the week. Despite record gasoline demand (approaching 10 million barrels per day), supply is also growing (almost record gasoline production and a flotilla of gasoline-laden ships delivering product to the East Coast). A few major East Coast refiners have already begun to reduce refining output due to declining economics, and it may take more to work down the substantial level of product in tanks in PADD I.

071116 Weekly Pricing Graph

Published by PAPCO, Inc. (PAPCO)

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