Americas News
Crude Prices Rise Marginally, But One Trader Insists A Rebound Is Imminent
Concern over crude supply disruptions in Venezuela were said to have returned to haunt the trading community on Tuesday, but it was hardly enough to compensate for U.S. crude's 4.2 percent loss the day prior: West Texas Intermediate on Tuesday climbed a mere 2 cents to close at $68.08 per barrel, while Brent rose 49 cents to $72.33.
The reason Venezuela became an issue again is because the Bolivian republic's four crude upgraders are scheduled to undergo maintenance in the next few weeks - meaning more oil will go offline temporarily (the units can process a combined 700,000 barrels per day).
Traders are also said to be keeping a close eye on U.S. inventories, which are expected to decline by 3.5 million barrels in the week to July 13, according to a Reuters poll,
Still, the general sentiment is that countries previously suffering outages are now online, and that combined with increased output from other nations has taken away much of the worry that the market is headed for a massive tightening.
In acknowledging that oil prices have fallen by almost 10 percent over the last week as a result, John Kilduff, founding partner at Again Capital, remarked, "It's sort of like a piling on now at this point in terms of increased production from the Saudis, from the Russians, from Libya.
"We've just gone through support levels like a hot knife through butter, $70 and now $68; the main level really now is that $64 low from last month."
Of course, not everyone is convinced that oil prices are on a steady decline as many (including U.S. president Donald Trump, who wants to give American motorists a break at the pump, and countries such as India with their growing but fragile economies) have called for: Daryl Guppy, a trader an author, told CNBC that technical analysis shows oil heading for a rebound.
Guppy based his argument on a careful study of the long-term support level for oil combined with the uptrend line as well as a moving average indicator: these elements, he said, suggest "that the current [price] retreat is temporary rather than the beginning of a trend change."
Still, Guppy's calculations show the upside target for the trend continuation at only $76 - a far cry from the triple digits that so many respected analysts have said is the inevitable fate for crude prices, given current geopolitical circumstances.
Meanwhile, determined to prevent the Organization of the Petroleum Exporting Countries (OPEC) from causing what Trump views as artificial and undue price inflation by removing crude supplies from the market, U.S. senator Chuck Grassley, along with a fellow republican and two democratic lawmakers, have introduced legislation in the Senate that will allow Washington to bring lawsuits against OPEC members for antitrust violations.
Grassley said in a statement, "It's long past time to put an end to illegal price fixing by OPEC," and he added that the feds are "committed to reducing our reliance on foreign oil, especially when it's artificially and illegally priced; our bill shows the OPEC members we will not tolerate their flagrant antitrust violations."
Although both George W. Bush and Barack Obama threatened to use their veto power to halt similar legislation from becoming law, Bloomberg notes that "the risk for OPEC is that U.S. President Donald Trump may break with this precedent."
Given recent events, it's hard not to imagine a global crude producing community that can easily turn on the taps to compensate for shortfalls, even of the magnitude of Venezuela or Iran: in addition to Libya coming back on line and the Russians eager and willing to pump full out, the U.S. Energy Information Administration earlier this week stated that American shale output is expected to rise by 143,000 bpd to a record 7.47 million bpd in August.
