Americas News
Crude Flat as Traders Face Conflicting Messages About Where Market is Headed
Crude prices on Tuesday settled flat after testing three week lows, based on a host of mixed messages including weaker than anticipated Chinese demand data and the International Energy Agency first stating that the market would be rebalanced next year and then insisting that the Organization of the Petroleum Exporting Countries (OPEC) would have to dig in "for the long haul" if a meaningful balance was to be achieved.
While Brent settled up 7 cents to $50.80 per barrel, West Texas Intermediate settled down 4 cents at $47.55.
Of the data that showed Chinese oil refineries operating in July at their lowest rate since September, John Kilduff, founding partner for Again Capital, echoed the frustrations of observers by saying, "We had seen in the past few weeks that demand growth was robust, and this turned that on its head."
Based on current and forthcoming news, it's doubtful if any clarity will occur with regards to where the crude market is headed in the near-term: for example, the momentary relief that was had earlier this week when Libyan production was stymied by civil unrest is now over, with the Sharara oil field increasing production and the Zueitina port reopened for business.
On the other hand, some analysts are eagerly awaiting the Energy Information Administration on Wednesday to confirm American Petroleum Institute figures showing a U.S. stockpile draw of 9.2 million barrels last week - the largest crude draw since September if proven valid.
James Williams, an economist at WTRG Economics, said the news "may reverse some of yesterday's real big decline"; however, he conceded that "even a big draw is bucking up against some very bearish numbers from the EIA yesterday" on shale output in September rising to record proportions.
As for the geopolitical situation directly affecting crude that had most analysts worried of late - Venezuela's worsening economic and social condition - traders are now predicting that Asia will import Venezuelan crude - perhaps as much as 740,000 barrels per day - if the U.S. sanctions against the Bolivian republic kick in.
Mike Tran, analyst for RBC Capital, wrote, "The realignment of trade flows to push Venezuelan crude to Asia...would entail substantial logistical challenges that would on the margin be bullish (for) sour crude markets, but not necessarily sustainably bullish (for) crude prices."
And while the implications of U.S. sanctions also caused trepidation in the analytical community, U.S. vice president Mike Pence said on Tuesday he is confident about reaching a "peaceable" solution through economic and diplomatic pressure on Nicolas Maduro, the country's president.
Earlier this week, Yousef Gamal El-Din, anchor of Bloomberg Markets, astutely pointed out that "hedge fund managers and money managers in general are getting a little bit bored with the crude oil trade.....we're stuck in this middle range [with] lack of movement in either direction."
