After surviving two early-morning sell-off attempts to start the week, oil prices are gaining for a third day this morning, aided by a bullish inventory report from the API.

Following another see-saw trading session Tuesday in which early losses turned into gains late morning only to stumble into the close, the API’s report was said to show an 8 million barrel decline in oil inventories last week which sparked an immediate buying spree across the board late in the afternoon that carried through the overnight session.

Those overnight gains have been tempered by news that the Saudis pumped more oil than their OPEC-cut quota in June.  While the excess volume was minimal, and likely has more to do with meeting domestic consumption than a refusal to comply with the cartel’s agreement, it’s still a reminder that there is excess capacity for crude production that can be brought online as needed, a luxury that didn’t exist for most of the past 20 years.

The gains were also a bit muted due to refined products not following crude’s bullish trend in the API report.  Gasoline stocks were said to be down less than 1 million barrels on the week, while distillates rose 2 million barrels.  The DOE report is due out at its regularly scheduled time today, 9:30 central.

The EIA released its monthly Short Term Energy Outlook yesterday, revising its forecast for oil prices lower by $2/barrel this year, and reducing its expected US oil production for next year as those lower prices are expected to lead to lower investment.  That said, the agency is still predicting that the US will surpass its all-time record for crude oil production in 2018 at just under 10 million barrels/day.  What may be most impressive about that projection is that it would mean that US production growth would be greater than all other non-OPEC nations combined for 2017 and 2018.

It was a week ago that the 8 day rally ended in dramatic fashion with an outside-down reversal, setting the top end of the trading range between $47 and $44 for WTI that we seem to be stuck in now.  Until we break out of that range, the charts suggest we are likely to be stuck chopping back and forth for a while.

CLICK HERE for a PDF of today’s charts

Charts from the STEO