As bullish headlines continue to populate our mobile devices, i.e. “Global oil demand estimates rising” or “Production output pact likely to remain in place beyond March”, West Texas Intermediate prices for October delivery are bucking the recent assumption of a demand fall-out from hurricanes Harvey and Irma of potentially 900,000 bpd this month and catapulting to levels not seen since May. WTI rallied as high as $50.50 this morning before pulling back to its current levels of $50.12 up $0.82 as of 12:15pm EST. Since the end of August, Light Sweet Crude has gained almost 11%. Refined products are mixed with RBOB down $0.0088 at $16385 and HO up $0.0098 at $1.7783.
Technically, pushing and settling above $49.46 for the week, should indicate a good low in the near term and bullish continuation through the balance of the year with sights locked onto the mid $50’s within several weeks. This strength brings about a topic that hasn’t made headlines for quite some time, SHALE PRODUCTION. Shale drilling has tilted its hand and has shown sensitivity to changes in forward pricing in WTI. Shale producers, on average, view a breakeven price of around $50 a barrel. The calendar strip for 2018 is currently valued at around $51.25 which will certainly be interpreted as a sign to increase output and begin cranking up their drilling activities once again. With higher forward prices, shale producers will be able to lock in more production next year at values that are profitable. We shall soon find out if the power of shale will keep a lid on prices or if the power of OPEC rebalancing rhetoric catapult crude prices even higher. Meanwhile, the supply and demand dance continues.