Oil Prices Give Up Gains On Strong Dollar – Oil and Gas Market Summary 10/20/16

Oil prices daily podcast discusses all of the news, events, and trends influencing oil prices each day.

Be sure to visit today s oil prices daily newsletter for links to all news stories and sources mentioned in this podcast.

Links:

Oil Prices Daily Newsletter for 10/20/16

Oil down 2 percent, strong dollar knocks US crude off 15-month highs Reuters

Nigeria cuts oil prices, sees huge cargo overhang in market Bloomberg

Commodity Markets Outlook World Bank

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Transcript:

Hello and welcome to the Oil Prices Daily Podcast.

Doug Stetzer here bringing you your daily recap of all the latest news, events, and trends influencing oil prices.

Oil Prices Daily is hosted on the EKT Interactive Oil and Gas Podcast Network and sponsored by Oil 101, a free online introduction to the oil and gas industry.

Join over 3,500 members of the Oil 101 learning community today at www.ektinteractive.com.

Let’s take a look what happened with oil prices for today, Thursday, October 20.

November crude expired today, down $1.17 for 2.3% to settle at $50.43. Now, we’ll be looking at the December contract, which settled down $1.19 at $50.63 with a NBD spread going out at 20 cents.

Of course, yesterday, we were looking at this big breakout on the EIA data. It also was a nice technical breakout out of the consolidation pattern that we had formed around $50.00, to a high of above 52.

Today, it was weak overnight and opened up and just really sank lower throughout the day. Volume was pretty good, moderate with about 900,000 futures contracts trading.
Of course, what people are going to be asking now is, “Was this a false breakout yesterday? Have things really changed that much to change the momentum?”

Or, what I would think, especially on an expiration day, a lot of length was in the market so there was a good reason to cover length, take profits, and a lot of it was encouraged, but, by the expiration as well as a strong dollar.

That is something that we haven’t talked too much about in the last few days, but the dollar’s really pretty strong. That’s going to have an adverse effect.

It’s going to be a headwind for oil prices. Now, if we continue to be the strong economy and start raising interest rates as the rest of the world is 0 or negative, that could really be a big trend going into the next year.

It’s something to keep your eye on. As always, dollar strength and it’s relationship with oil prices.

If you look at the daily chart, we’re right back where we started. It did stay above $50, but again, right in the middle of this 49-and-a half, to 52 range, that we have been looking at for the last 10 days or so.

Really, not a whole bunch of news today, but interesting and definitely worth keeping an eye on, was some stories that Nigeria has really made a nice rebound in their exports.

However, they’re really selling it to an over-supplied market.

We spoke about all of the cargos coming out of Saudi Arabia a couple of days ago and how that was driving up the cost of tanker rates.

Well, Nigeria’s been struggling to get their exports back. They enter into this well-supplied market.

Offered a pretty steep discount of a dollar even, on most of their crude grades to find buyers. There’s a couple of stories in the newsletter on this topic, including one from Bloomberg titled, “Nigeria Cuts Oil Prices. Sees ‘Huge Cargo Overhang in the Market.'”

The market is physically over-supplied. I remember a couple of weeks ago, there was a story about all of the cargos sitting up in the North Sea.

Definitely worth keeping an eye on as far as the fundamental side of this market. Nigeria, one of these countries that’s exempt from the oil price cuts, really struggling and trying to get back to levels of production where they were before.

They had numerous supplier disruptions. Their ability to recap production and exports is just another thing that makes it harder for the likes of Saudi Arabia to make the cuts happen necessary to get down to their number of 32 and a half or 33 million barrels per day.

Definitely interesting.

Combine that with the strong dollar and some other … The factors of the expiration and the length and the market, you get susceptible to down moods like this.

One of the things that will be very interesting to watch was before the breakout yesterday, we spoke about how the market was not rewarding these sellers when they dipped below 50.

We’re right back in that same scenario.

It’ll be interesting to see what this really long one-sided market can do if things start to slide. It could get really ugly, really fast.

As far as the momentum, it’s hard to say if this is a really breaking of the nice upward moves that we have.

It’s definitely a big down move. It’s hard to say if it’s a collapse and it’s the end of the uptrend for now. We’ll have to wait and see on that.

Although, if you look back towards June, this market’s got a lot of resistance up here just above $52. It hit it up in June. Fell all the way down below $42 by August, and here we are again.

Interesting to see if this is all just one really big range, if we are really able to hold in a 50 to 60-type range, of if we’re still in a 40 to 50-type range. That remains to be seen.

Of course, a lot of it depends on OPEC’s ability to implement the deal that they have proposed. The news, such as the Nigeria news out today, just pointing out yet another hurdle that they have to overcome in actually making this production deal happen.

The last thing that I wanted to point out, the World Bank raises its 2017 oil price forecast from 53 to 55. They did release their quarterly commodity markets outlook.

I haven’t had a chance to read it, but we mentioned just last week that OPEC had released their oil market report recently. You’ve got a lot of economic research out there to read. Of course, the links to both of these reports are in the newsletters and in the Podcast show notes.

A lot of research to be done there.

There’s a lot of numbers flying around. Again, the devil is really going to be in the details with these producers who are exempt from the deal. What are they actually producing?

Where are these cargos landing? How does that impact supplies here, especially in America, the States, with WTI prices.

One of the things that we mentioned yesterday in the Podcast was that a big part of this draw was that imports were down by 1,000,000 barrels per day, even though US production was slightly up, we saw this big draw.

Again, it really jives with what Nigeria saw when they came out into the market. There’s just not a lot of buyers for this imported crude. They’re going to have to fight for market share.

The market share that they lost with price cuts. Very interesting to watch. We’ll just have to keep our eye on it.

Of course, you can get our daily recap of all the news and events influencing oil prices by going to oilpricesdaily.com and signing up for the newsletter.

You can also subscribe to this podcast on iTunes. Thanks a lot and we will see you tomorrow.

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