EIA Data Looms
Today’s Spotlight Market
Crude Oil is lower ahead of today?s EIA inventory report, dragged down by selling pressure in European equity prices. The Energy Information Administration lowered its price forecast for the remainder of 2015 and 2016, adding to the already bearish tone in early trading. The currency markets were spooked by China?s recent devaluation of the Yuan and there is a certain uneasiness among currency traders, who believe other exporters may move to devalue their own currencies to stimulate activity. This has given the greenback a bit of cushion and may, in turn, lessen the demand for commodities. The currency markets have also been especially skittish of late due to the wild swings in equity prices and next week?s FOMC meeting.
Fundamentals
The EIA reports its inventory data today due to the Labor Day holiday. Traders are expecting a Crude Oil build of 300,000 barrels for last week, while Gasoline and Heating Oil are forecast to be unchanged and rise 700,000 barrels, respectively. In its monthly report, the EIA had forecast WTI Crude Oil prices to average $49.23 this year, down from its earlier estimate of $49.62. In 2016, the administration lowered its forecast to $53.57 versus its prior expectation of $54.42. The EIA expects US Crude Oil production of 9.22 million barrels a day, down from the prior estimate of 9.36 million barrels. Production in 2016 is expected to fall to 8.82 million barrels a day. The disconnect between production and price estimates suggests that the EIA expects demand to remain weak well into next year. August OPEC production may have actually fallen slightly lower to 31.26 million barrels a day, according to a Platts survey. While the figure is lower than July, OPEC production would still be above the Oil cartel?s target ceiling of 30 million barrels a day.
Technical Notes?? -? View Today’s Chart
Turning to the chart, we see the October Crude Oil contract trading lower and choppy after 3 sharp up days to end the month of August. Prices broke through but failed to hold above near-term resistance near the 48.25 level. The October contract was also unable to break through the 50-day moving average. Prices have flirted with the 20-day moving average in overnight trading. A close below the average may suggest that a near-term high may be in place.
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