Crude Oil Weekly Fundamental Analysis, July 20 – July 24, 2015 Forecast

Analysis and Recommendations:

September Crude Oil futures finished the week lower. Last week’s price action was relatively calm compared to the previous week, but nonetheless, sellers remained in control. During the previous week, investors had to deal with the fallout from the Greece bailout vote and the crash in China’s equity markets. This week’s attention centered on the signing of the Iran nuclear deal and increased U.S. refinery runs.

Although the signing of the Iran nuclear deal for the most part was already priced into the market, there was still some spillover selling related to the event. Investors are worried that the deal will contribute to the global oil glut. With the deal, Iran will be allowed foreign investment. Iran is expected to use the new foreign money to improve its oil industry infrastructure. Initially, Iran is expected to export about 500,000 barrels per day. With more efficient equipment, it could double this figures in six months.

Last week, the U.S. Energy Information Administration (EIA) reported that total crude oil stocks fell the week-ended July 10. The highlight of the report was the record refinery runs. Crude inventories fell 4.3 million barrels to 461.42 million, compared with trader expectations for a decrease of 2.0 million barrels.

Despite the greater-than-expected drawdown, oil prices broke on the news because the EIA numbers were far less than the reading by the American Petroleum Institute (API). Its report showed a 7.3 million barrel decline. In addition, hidden inside the EIA report was the news that crude stocks at the Cushing, Oklahoma delivery hub for crude futures rose 438,000 barrels. The EIA also reported that U.S. crude imports rose by 38,000 barrels per day to 6.78 million barrels per day.

Although overall inventories fell, the inventory rise at Cushing and the steady flow of imports, offset the drawdown in the API and EIA reports. The drawdown in these reports were the result of the high refinery utilization rate and the increased demand for refiners for crude oil.

The fundamentals are clearly bearish because of expectations of increased global supply, however, this week’s price action is likely to be related to technical price action. The primary concern for investors this week should be trader reaction to the last main bottom and low for the year at $49.69. Value-seekers and aggressive counter-trend buyers may begin to step in as the market approaches this bottom. Because of the expected clash between buyers and sellers at these price levels, traders should expect increased volatility.

U.S. oil prices declined further than Brent prices, largely due to concerns about increased U.S. production. As of Friday, Brent was about $6.00 more expensive than WTI, the highest level since late May.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks. 

WEEKLY

This Week in Petroleum
Release Schedule: Wednesday @ 1:00 p.m. EST (schedule)

Gasoline and Diesel Fuel Update
Release Schedule: Monday between 4:00 and 5:00 p.m. EST (schedule)

Weekly Petroleum Status Report
Release Schedule: The wpsrsummary.pdf, overview.pdf, and Tables 1-14 in CSV and XLS formats, are released to the Web site after 10:30 a.m. (Eastern Time) on Wednesday. 

Major Economic Events for the week that you should be monitoring:

Wednesday, July 22    U.S. EIA Weekly Crude Oil Inventories Report