The Price of Crude Oil Stagnates as Stocks Rise and OPEC+ does Little. Will WTI Survive?

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EnclaveFX
Aug 04, 2022
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TALKING POINTS:  


lCRUDE OIL, EIA, API, OPEC+, AUD, FED, USD, GBP, and BOE

lCrude oil prices are trying to recover from the recent low following the OPEC+ meeting.

lThe Fed has stepped up its rhetoric in response to some markets' hopes for a rate cut.

lWill a lower WTI oil price help the BoE when they raise interest rates to fight inflation?


After the Energy Information Administration (EIA) revealed that 4.5 million barrels of U.S. oil were added to inventory last week, crude oil prices have been under pressure throughout today's Asian session.

This is in addition to the American Petroleum Institute's (API) report from the day before, which indicated a rise of 2.165 million barrels of U.S. crude oil. The Organization of Petroleum Exporting Countries (OPEC+) added a pitiful 100,000 barrels per day to the September supply at their meeting yesterday.

They emphasized the limitation of available capacity. Market view holds that even with their best intentions, they wouldn't be able to increase production significantly.

Another enormous trade surplus of AUD 17.67 billion for June lifted the Australian dollar. This exceeded the AUD 14 billion predictions and the AUD 15 billion surpluses from May.

Neel Kashkari, president of the Minneapolis Federal Reserve, reiterated earlier in the U.S. session that there is no indicated pivot from last week's FOMC meeting.

James Bullard, president of the St. Louis Federal Reserve, confirmed what he had said before, saying that he expected the Fed funds rate to be between 3.75 and 4.0 percent by the end of the year.

Comments from Richmond's Thomas Barkin and San Francisco's Mary Daly helped temper the hawkish rhetoric. If they are all saying it is to be believed, a Fed hike halt will not likely occur shortly.

The U.S. Dollar and the rates market over the last two days reflect this viewpoint. High-yield bonds and equity markets are pricing in reverse.

With Nasdaq achieving a 2.59 percent gain, Wall Street had a good day. All of the APAC equity indices are mainly in green. At the time of printing, gold is somewhat firmer over US$ 1,770.

The U.S. Senate also approved the NATO membership of Finland and Sweden.

Before the Bank of England's (BoE) rate decision, the pound scarcely changed today. They are expected to increase to 1.75 percent by 50 basis points. The market will also pay close attention to any news on future active Gilt sales.

The BoE's rate decision will be followed by initial unemployment claims and trade data for the U.S.

Analysis of the WTI crude oil market

Backwardation has significantly decreased during the past few days. It happens when the contract closing in on settlement is dearer than the contract closing following that first one.


It demonstrates the market's readiness to pay extra for immediate delivery instead of delayed delivery. Lower pricing might be possible as backwardation returns to levels before the Russian invasion of Ukraine.