Negative Headlines couldn’t change the tone for the September Crude Oil contract on Tuesday, August 16, as weakness in the US Dollar lends its support to price. The Nigerian oil minister said he has little optimism for output cuts by OPEC and the Russians say Iran has not given any indication it will agree to a production freeze. Iran hasn’t reached its goal of producing 4 million bpd of crude oil and is still trying to recapture lost market share due to US led sanctions. They have also stated they will look to increase production to 4.6 million bpd once they achieve their initial goal. Bulls however are still hoping that some agreement will be reached during an informal meeting at the International Energy Forum to be held at the end of September. It was US dollar weakness that was able to support crude oil today as traders think there is little chance for a September rate hike.
Even with the Fed’s Dudley trying to talk up a September rate hike, weakness in US economic data overshadowed his comments. The Dollar was hit hard and Crude Oil was able to overtake trendline resistance at 46.49 and approached resistance at 46.93 reaching a high of 46.73. Crude hovered near the highs and settled at 46.58 as traders waited for the afternoon release of the API report. The API Report showed crude oil inventories declining by 1.007 million barrels worse than the increase of 950,000 barrels expected. Cushing, Oklahoma inventories declined by 680,000 barrels as traders were looking for a 100,000 barrel build. Gasoline and distillate inventories shocked traders however with large unexpected builds in supplies. For the past two weeks gasoline has shown successive large drawdowns in supply. This week gasoline showed a large increase in inventories with 2.167 million added to storage. This is the largest in 6 months. Distillates also shocked with a 2.406 million barrel increase. Crude Oil tanked after the report, trading down to 46.09 before recovering and it ended the day at 46.41. We get the EIA report on Wednesday morning and confirmation of the API report could lead Crude Oil to test support at the 50 DMA (45.80) and then the 100 DMA (44.95). We also have option expiration on Wednesday. This could add additional volatility to the market.
High 46.73
Low 45.34
Last 46.41
Daily Pivot Points for 8/17/16
R2 47.55
R1 46.98
PIVOT 46.16
S1 45.59
S2 44.77