from Bloomberg shows the September light
sweet crude oil futures contract since peaking in early June near $52.75.
It reached a low last week of about $39.20.
The turn last week came on news that although
oil inventories rose gasoline inventories fell dramatically.
The recovery seemed to have stalled at the end of last week near $42.40 but was
given a new lease on life by reports of
an OPEC meeting next week. OPEC President Al-Sada (Qatar)
seemed to try to make the most of the informal meeting.
Speculation that it may reach an agreement to freeze output or re-introduce
quotas seems a stretch, though of course, the usual advocates, like Venezuela
and Ecuador, are still pushing their case. Saudi Arabia has argued
that it is willing to freeze output if others do so too.
This puts
the onus on Iran. Iran’s output has risen by about 180k barrels a bad
since April, and about 600k barrels since the embargo was lifted. Their production is near 3.6 mln barrels a
day. Before the sanctions, it was producing 4.0-4.2 mln barrels a
day. Assuming rational actor model, it seems unreasonably optimistic that
Iran would participate in agreement that
would not allow them to return to status quo ante.
That means an agreement at the year-end OPEC
meeting may be a more likely time frame, but even then it may be a stretch.
Lingering US sanctions, companies wanting to avoid the situation entirely and
the existence of alternatives, has slowed Iran’s efforts to boost output
quicker.
The chart shows that September light sweet crude oil is nearing its 20-day moving
average (~$44.20). It has not closed above this moving average since
June 29. Above there is the 200-day moving average (~$44.20) and
the 38.2% retracement of the two-month decline (~$44.35).
Meanwhile, the US rig count continues to
recover. The oil rig count bottomed in late-May at 316. In the
following ten weeks, the rig count has risen in all but one. Baker-Hughes
reported last week that the oil rig count stands at 381, the largest since
March. We recognize that there may be a seasonal factor in the works. In July and
August 2015, the rig count rose eight of nine weeks.
In other developments, Libya has begun
maintenance work at its largest oil export terminal. US trade figures
show US oil exports are falling, and
imports are rising. China’s trade figures showed crude imports fell to
six-month lows, while net fuel exports surged to a record. Saudi Arabia
cut prices to Asia.
This week, the early call for the mid-week EIA
report is for a million barrel decline in oil inventories (following a 1.4 mln
barrel build in the previous week). Gasoline inventories are expected
to fall by
1.4 mln barrels after a 3.2 mln barrel draw down previously.