Vang SJC

WTI had a high volatility on June 17th on effect of U.S.’s declining crude inventory for the 7th week continuously. WTI decreased 0.5%, from $60.47 to $60.15.

According to EIA, U.S. crude inventory declined 2.7 million barrels last week, to 467.93 million barrels, more than forecast of 1.7 million barrels, but less than API’s report (2.9 million barrels). Stock at Cushing, Oklahoma, the delivery point for WTI, added by 112,000 barrels, the first rise since April. WTI decreased by $2.22 to $59.34 the lowest of the day.

After Fed President Janet Yellen’s unconfident statement about weakness hovering about labor market and disappointing wage growth in June FOMC. Dollar Index (measures relative strength of dollar with other 6 majors) drop 0.8% from 95.230.

WTI is traded at $60.43 at 3:45 p.m. GMT+7.

Fundamentals continue dragging oil down:

  • Iraq’s average production reached 3.2 mbpd in the first haft of June. After dealing with quality complains by classifying products into light and heavy Basra, Iraq’s oil export was boosted to 3.15 mbpd in May. This 2nd biggest producer of OPEC is aiming at 3.3 mbpd of crude export in 2015. Global excess supply threatens price recovery.
  • Canadian oil producers have given up the hopes that oil may come back to its golden age and are preparing hedging when oil inches up a little bit. If WTI came back to about $65, they would sell off to avoid the 2nd price plunge. The belief of price recovery in the fifth biggest oil producer is deteriorating.
  • According to Bentek Energy, analysis and forecast unit of Platts, outputs from big oil shale wells in North Dakota and Texas remain unchanged in May. Outputs from Eagle Ford, Texas dropped by 6,000 bpd in May, less than the reduction in April (down 8,000 bpd). Meanwhile outputs from North Dakota decreased by only 650 bpd. In a separate report, U.S. crude production reached 9.6 mbpd in the 1st haft of June, the highest since 5/1972.

  • Igor Sechin, CEO of the top oil producer in Russia Rosneft said it was U.S. that plays protagonist in the oil market, the influence of OPEC is fading away. U.S. accounts for 10% of global oil production with stably high outputs despite the fact that the number of oil rigs is dropping. U.S. and OPEC are trying to put as much oil as possible into the market, as a result, oil price may keep plunging.

There are some other factors that can support for oil but not much:

  • Iran and P5+1 started a new round about nuclear program negotiation, expected to end on June 30th. In the interview with Trend Azerbaijan on Wednesday, former CEO of Iran’s NIOC Fereydoun Barkeshli said that OPEC have to pave way by cutting production for Iran coming back to the market. However, experts think it takes long time for Iran to boost up production. Moreover, there is no way Saudi Arabian makes concession for Iran.
  • The 2nd biggest pipeline of Colombia was closed due to the bombard of The Revolutionary Armed Forces of Colombia (FARC). This pipeline carries 210,000 bpd from North-eastern Arauca to Caribbe. The owner, Ecopetrol, said closed-780-km pipeline needs several days to repair. Nevertheless, Colombia’s export will not be impacted immediately because crude stock at ports is still available.

Forecast: WTI has risen 1.52% from $60.04 and is heading to the resistance zone at $61, reached on 2nd, 3rd, 10th, 11th and 17th of June. It’s very likely that today WTI will hit back this level again and go down to support levels at $59.50 and $58.70. If it can break $61, the next resistance will be $61.70.

Ban Mai