RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Throughout recent weeks, there have been two major players causing a tug-of-war in WTI Crude Oil prices. They seem to be manifesting in terms of which camp has the more dominant influence on the commodity. It has been known that US rig count is up significantly and that shale company inventories have been stockpiling in recent months, but what has been looked over is the actual reasoning behind this increase in WTI production. There has been gradually increasing stability in the energy sector, thus causing stimulation in manufacturing activity as well as a spur in capital spending. The Trump administration has been very adamant about increasing the American influence over the energy sector, as well as increasing corporate profits across all sectors (energy included). This has caused an increase in productive activity by domestic energy companies and this has only been further incentivized by Trump’s ideology of being less dependent on foreign nations for vital resources such as petroleum. This in turn caused a slump in prices down to the lower $47/bbl range but the market has been telling us that the OPEC accord has much more influential capabilities than the oil situation in the US; yes, it has been known that the OPEC nations are planning on cutting 1.8 million bbl/day in production, but what the market has been particularly fond of is the periodic updates from OPEC official speeches regarding compliance by the different nations on the deal. Actual execution on the deal will cause prices to further surge as investor sentiment will transition from buying the rumor to buying the fact. Execution of the deal is looking continuously more and more likely as even Iraq has been mentioned to be more likely to comply with this accord compared to previous attempted production cut deals.

UPDATE 4/13: The EIA petroleum status came out Wednesday showing a decline in wk/wk inventory of -2.15 million bbls by the US.  Conversely to the bullish data expressed in the report, Trades used the news to book gains from the 10% price increase seen mo/mo. What seems like the most critical factor now outside of OPEC’s deal and US inventory are the growing geopolitical tensions across the board; with the US launching a missile attack on a Syrian airbase, Russia considering the attack an act of aggression, North Korea continuously exemplifying itself as an aggressive force, and supply disruptions in Libya as well as a supposed pipeline explosion in Yemen, it would be safe to say that increasing US inventory is the lone factor slightly hindering the oil bulls. As these international factors continue to culminate and as US production begins to stabilize, crude oil prices could continue to see rallying into the $54-$56 range within the near-term with slight pullbacks from long profit-taking and minimal short interest along with moderately likely bearish EIA and Baker-Hughes data within the coming months.


Crude Light Daily Chart

RJOF Editorial Team