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Higher Prices for Crude?

CRUDE OIL

Even though the energy markets are presented with a positive global macroeconomic vibe to start today US crude oil prices have tracked in negative territory. From the tropical storm/hurricane sector hurricane Lee has skirted the US East Coast already and headed out to sea to dissipate and tropical storm Margot also not a threat to landfall anywhere and the tropical wave off the coast of Africa many days off determining its track traders are likely to keep their focus on tight supply. The Cushing Oklahoma hub is a very important storage facility for US exports and is approaching the lowest levels in 9 years for this time of the year. Yet another positive supply development facing the trade today is a decline in Iraq output projected for this month and the residual “market bid” from the view that the Saudis can lift prices. Given the strength in the product markets last week, the loss of momentum in crude oil stands out as a possible early warning sign of a top in the petroleum complex. Looking ahead, tightness in the product markets are likely to help support and perhaps even drag crude oil prices higher. Another bullish development is a trend of tightening global floating crude storage, tight European crude supplies and crude oil supplies at the EIA have declined nearly 30 million barrels lower in 4 weeks. In conclusion, supplies are tight, and the bull camp has the fundamental edge, but prices have likely entered “expensive” levels.

gas pump in car

NATURAL GAS

The second half of the hurricane season has just begun meeting AND we are currently within the peak of the season. At least in the near-term, prices will be underpinned by the Australian gas worker’s strike. However, the strikes have started and there are no talks planned and some measure of speculative buying and short covering is possible, but we doubt those gains will hold through the week. While we give a minimal edge to the bull camp, our views are based on oversold technical signals, the potential the market has found solid chart value and the potential for specs to get long because of the increased formation of hurricanes.

 

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