“Step right up and see the amazing Sun completely disappear for more than 2 minutes! Don’t miss the only total eclipse spanning the entire United States of America since 1918!” As millions of Americans across the nation fight the urge to look “directly into the sunlight”, and witness the beauty of the Sun’s corona shimmering in the darkened sky, I can’t help but think of the most recent disappearing act of crude inventories. U.S. commercial crude inventories have fallen 13% from their March highs to 466.5 million barrels. With seven consecutive weeks of crude inventory draws and Friday’s Baker Hughes rig count having its biggest drop since January, Kuwaiti’s oil minister points to the production cuts from OPEC and non-OPEC producers as a sign of success with output cuts taking effect. As OPEC’s oil supply is set to fall by 419,000 barrels per day this month and OPEC crude oil exports falling by 750,000 barrels per day through the first half of August, it’s difficult not to imagine WTI hovering around the $50 level in the near term. That being said, even though we saw a 3% rally at week’s end in the energy sector, WTI for September delivery is off almost 2% as of 12:00 pm EST. RBOB is down $0.0436 at $1.5804 and Heating Oil is down $0.0414 at $1.5790. The 12 day, 26 day, 100 day, and 200 day Exponential Moving Averages are unable to hold their ground.
With hurricane Harvey fizzling out, followed by the duo of tropical storms behind Harvey being downgraded to 10% and 0% chance of cyclone formation and Shell expecting to restore its Deer Park, Texas refinery by mid-week rather than 2 weeks, the energy sector is having trouble finding some real upside footing. A settlement today under the $48.16 200 day EMA, should send WTI on its march towards the 12 month channel-bottom of $42.75. If we happen to settle above the convergence of all these averages, we should see $49.43 (6 month channel-top) within the week. In the meantime, I suggest we all follow what our elementary teachers and our parents had instructed us to do in the past, “DO NOT STARE DIRECTLY AT THE SUN!”