Oil, Ida, Nicholas, and FED

Oil and the week ahead! 

Market analyst – IFC Markets

While still, about 25% of US Gulf crude is offline, we are getting closer to another Federal Reserve meeting and market participants are turning their focus to that. This focus and concern can help the US dollar to rise and put the stock markets under pressure, ahead of the FOMC meeting. 

Last week we had two storms that affected the market. Idea by Category “4”, has shut down the 95% of US Gulf oil and gas production. However, Nicholas, the second storm, could not cause much offline in production lines. At the same time, weekly inventory reports, both from API and EIA, also showed more decrease than market expectations, and it helped the trend of rising prices. 

On the prices front, last week and after a shortage in supply, WTI had the fourth straight weekly gain. West Texas Intermediate, the benchmark for US Oil, was up 3%. Crude Oil also despite the 33 cents, or 0.4% decline on Friday, still ended the week with a 3% weekly gain. 

Energy prices, especially Crude prices fell a bit before the weekend after the Michigan University consumer survey that showed Americans’ desire to purchase houses, household items, and cars, getting closer to its lowest levels, since the prices are increasing incredibly, and they are expecting to see reduce inflation. If clients pausing the purchases just because they are waiting to see lower prices, it means that they believe that higher inflation is transitory and it is a positive sign for longer terms. According to the Michigan University survey, 5-Year Inflation Expectations is 2.9%. 

Last week as mentioned Cured Oil inventories fell sharply. According to the EIA report, US crude oil stockpiles dropped by 6.422 million barrels in the week ended 11 September. As refineries facing a squeeze in domestic crude supply, both Energy Information Administration and American Petroleum Institute reports for this week, which respectively will be out on Tuesday and Wednesday evenings, are supposed to show another sharp decries in the inventory levels. Also, we should not forget about Baker Hughes’s weekly survey on US oil rigs reports on Friday. Last week’s data showing us an increase to 411 rigs in the Baker Hughes report. 

For the week ahead, despite some recoveries, still, a shortage in US supply continues and we are waiting for another negative report for inventory and it is positive for prices. On the other hand Stock markets are not expecting to perform well, which is not in favor of energy prices. So we are waiting for mostly flat movement around $70, with weakness in the first days and recovery in the second half of the week. 

Oil Outlook

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