As we digest today’s DOE’s Weekly Petroleum Status Report, we, once again, look to ye ole time-tested, most fundamental concepts of economics—supply and demand—for any foreshadowing into the energy markets. Despite an OPEC-led output cut, OPEC stated this morning that its oil production jumped in June and forecast for world demand for its crude will decline next year as rival producers pump more, leading to a market surplus in supply. However, Saudi Arabia said it will cut crude shipments to its customers by 600k bpd in August to try to balance the rise in consumption during the summer. As the balancing act teeters back and forth overseas, today’s DOE stats, coupled with yesterday’s EIA’s forecast cut in 2018’s production, paint a different picture. Crude stocks plunged more than expected last week, while gasoline stocks decreased and distillate inventories rose. Crude stockpiles fell by 7.6 million barrels, gasoline stocks fell by 1.65 million barrels, and distillates stocks were up 3.13 million barrels. At first glance it would appear quite bullish with the largest crude draw since last September; however, WTI has come off its highs, post-report, trading at $45.69 vs an intraday high of $46.48 as of 12:38 p.m. EST. RBOB is up $0.0100 at $1.5283 and Heating Oil is up $0.0078 at $1.4883. On a technical level, we have treaded back into the upward channel dating back to August of last year. If WTI can hold above $45.02, some technicians see a run up to the 100 day moving average of $48.71 within 3 – 5 trading days.
As the laws of supply and demand continue to battle it out in our commodity-driven world, we must, yet again, wait and watch the ebb and flow of crude oil prices. This presents the difficult question of, “what level will crude prices get to next?”