Refined Products & Brent Crude are trading lower for an 8th straight trading session, and are once again on the cusp of another sharp move lower after Monday’s bounce proved to be short-lived.
A 2nd day of stronger stocks, and concerns over escalating tensions between Iran and Israel weren’t enough to keep energy prices in the green yesterday, with only WTI managing to hold onto small gains after most contracts were up nearly 2% early in the session.
OPEC released its monthly oil market report yesterday, and reported the cartel’s output held steady in January, with increases from Iraq and Saudi Arabia offsetting continued declines from Venezuela. The January report is also a stark reminder of how positive the news for both energy and equity markets was just 2 short weeks ago, and how quickly things can change.
The IEA threw more cold water on Oil producers this morning in their monthly oil report saying, “… having cut costs dramatically, US producers are enjoying a second wave of growth so extraordinary that in 2018 their increase in liquids production could equal global demand growth. This is a sobering thought for other producers currently sitting on shut-in production capacity and facing a renewed challenge to their market share.” The agency did however revise its demand outlook higher for the year, and noted how quickly the global supply glut has been drawn down.
RBOB gasoline futures are trading below their 200 day Moving Average this morning, and if prices can hold below that support it looks like we may drop another dime to the October lows around $1.55. ULSD has also traded below the low trade from Friday this morning, opening up another 9 cent drop until it reaches its next layer of technical support. Neither Brent or WTI have threatened their lows from Friday’s collapse so the next move lower is certainly not a foregone conclusion, but we’ll need to see oil prices rally soon if there’s a chance to stave off the downward momentum.