The Phil Flynn Energy Report
Stuck in a rut
Oil is stuck in a rut and has the same odds to break out as we have with the House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin making a Covid-19 relief agreement today.
After posting its first gain in 4 sessions, oil is starting to struggle. We still have no deal on a stimulus package, but the main reason that oil is struggling is because the API defied the whispers and dared report a 584,000 barrel crude oil supply build. The market seemed shocked and reversed a late-session rally because there were talks of a significant supply drop going into the report. Yet supply reports in the aftermath of a hurricane like Hurricane Delta can be messy and unpredictable.
Yet the surprise drop in supply wasn’t in oil, it was in distillates. The API reported a massive 5.983 million barrel draw that should ease concerns of massive oversupply. Demand has been strong due to farmers harvesting crops way ahead of schedule. We also had an uptick in airline passengers that is probably helping jet fuel demand.
Gasoline supply also was reported lower by 1.622 million barrels. If the EIA confirms, the gasoline supply will fall further below the average range for this time of year.
Russia suggests that it’s too early to commit to an extension of the OPEC+ cuts, yet suggest they’re open to it if the market prospects don’t improve. The JODI Oil World Database reported that Russia registered its historic low production over the previous 3 months. Russian crude oil production in August rose MoM by 413,000 barrels per day (bpd) to 9.22 million bpd. Russian crude oil refinery intakes in August rose again month-on-month by 82,000 to 5.46 million bpd.
Saudi Arabia's total oil products closing stock level in August rose sharply month-on-month by 8.06 million barrels to 89.50 million barrels. The Saudis have been storing up until demand improves. Saudi total oil products demand in August rose month-on-month by 170,000 to 2.55 million barrels
According to JODI, having hit its all-time high in June, Chinese crude oil imports have fallen over the 2 consecutive months by 1.77 million bpd to 11.21 million bpd.
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