While the oil market is looking for supply to rebound this week, there is now rising concern about demand. With the Fed talking up raisng interest rates and global central bankers questioning the effectiveness of monetary policy, it seems that there is not a lot of optimism in the global economy. That shakiness in global markets will hurt oil demand expectations as investors look to hold close their investment dollars.
Oil traders are also pricing in a rebound in crude oil supply after hurricane Hermine led to a record low Gulf oil import. We should see supply rebound by about 5.0 million barrels this week. We may also have to worry about another storm later this week. There are two tropical waves in the Atlantic that could impact oil imports later this week.
Traders are also talking about the U.S. oil rig count that rose by 7 oil rigs and 4 natural gas rigs last week. Some believe that will lead to more oil and gas production even though some of those rigs are replacing rigs that are in decline. Oil rigs are still 238 lower than they were a year ago and gas rigs are 104 lower than a year ago.
In Libya the U.N. backed unity government lost control of all the major oil ports to a group led by General Khalifa Hifter. According to reports he and his militia have taken control of Ras Lanuf and Sidra, among Libya’s largest oil ports, and were fighting for control for Zuwaytinah. There were also clashes around the nearby town of Ajdabiya, Ahmed al-Mismari according to the Washington Post. This could stop or slow Libyan exports and might have been a bigger deal if the market was not so focused on a weakening in the global economy.
Oil futures, looking out deep in the curve, could be advisable. Despite concerns about demand short term we see the market getting in balance early next year. Look to use weakness to establish trades down the curve.
Natural gas is on the rise as summer continues in the east and winter starts in the west. We are seeing predictions of snow in the mountains out west.
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