WTI Prices Continue To Pull Back From The $90 Level It Breached Last Week For The First Time In Nearly A Year

Heating oil futures are leading the energy pack lower this morning, trading down over 2% so far to start the day. The prompt month RBOB contract is following suit, shaving off 1% in pre-market trading, while the American and European crude oil benchmarks trade ~.6% lower.

WTI prices continue to pull back from the $90 level it breached last week for the first time in nearly a year. The contrasting dynamics of Saudi and Russian supply metering versus soft demand outlook had energy markets whipsawing over the past couple weeks. While some still see a pathway to $100 oil, and beyond, we might be seeing high prices ‘fix’ themselves: US oil production is currently estimated (by the DOE) to be at 12.9 million barrels per day, the highest level we’ve seen since the Spring of 2020.

While initially sparking volatile market action, the Russian refined product export ban that was announced Friday has drifted from headlines so far this week, probably due to the fact that the restrictions won’t apply to a slew of distillate products, nor to one of the world’s largest energy consumers.

The EIA noted this morning the shift in Kuwaiti energy exports from crude oil to refined products. While this isn’t unexpected news, since we knew about the ramping up of production runs at the nation’s Al Zour refinery at the beginning of the year, it is a nice reminder that the global market isn’t as strapped for supply as we were in 2022.

Tropical storm Phillipe is still expected to stay out in the Atlantic for the rest of its organization, without strengthening into a hurricane. There is a system (AL91 Invest) following right behind it and while the NHC gives it a 70% chance of developing over the next week, it too looks to only be a threat to marine traffic and fish.

After dropping through its 5-, 10-, and 20-day moving averages over the last week, there isn’t much in the way on the daily ULSD charts to keep prices from dropping to the $3 level. However, even with the three days in a row of trading lower, HO is still on track for monthly gains, as it has been since June. Finishing lower than $3.10 for September would go a long way to ease prices off multi-month highs, but if that can’t be managed in the next four days, it will be up to October trading to decide if this rally has really run out of steam or if traders were just profit-taking this week.

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From last week’s DOE report: