The sounds in the streets of the old quarter in Pamplona, Spain may be only those of footsteps from locals and tourists this time of year, as they await next summers’ Fiesta of San Fermin, (running of the bulls), but the sounds in the streets of Cushing, OK are those of 1200lb toro bravos charging towards levels that haven’t been seen in crude oil since the first quarter of this year for WTI and since July of 2015 for Brent. Below are continuation charts showing the most recent highs in WTI and Brent.
Brent (which is a backronym for the formation of layers of the oil field: Broom, Rannoch, Etive, Ness and Tarbert) futures are off their 2 ½ yr highs of $59.49 by midday and WTI is down by 0.46% at $51.98. With oil demand growth in emerging economies led by China and India, drawing down oil stockpiles faster than expected, the bulls shall dictate the markets in the near term. Some top commodity trading houses are now expecting global demand to increase by 2 million barrels to 4 million barrels per day by the end of 2019 due to a sharp drop in exploration spending/investments in recent years leading to a decline in output going forward. In the latest oil market report by the IEA, global oil supply was 97 million barrels per day during the second quarter of this year whilst demand was 97.9 million barrels per day. However, some other top commodity trading firms believe if OPEC do not extend their cuts beyond 1Q 18, the “shale affect” comes into play and the stock draws will shift to builds in 3Q 18. While the supply and demand dance continues, the technicians are eyeing the nearby channel-top resistance of $53.15 and the 38.2% Fibonacci Retracement support level of $49.79. APIs tonight and DOEs tomorrow will try and paint a clearer picture on the energy sector scenario as well. In the meantime, the Spanish Fighting Bull has reached the bullring and has pointed its curved horns with a snarl and a snort towards the flowing red cape….Olé!