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Crude Reveres Swift Decline But Can’t Prevent Weekly Loss

  • Crude oil reversed a sharp decline in the second half of the session, leaving it back with gains seen through London trade as tightness in global supply continues to provide some support.
  • The sharp decline could have been linked to Marathon shutting its Garyville refinery (even if news of the fire was report hours before) and the Brent-WTI spread has drifted wider to $4.69, but speed of the retracement suggests potentially some positioning adjustments at play as well.
  • Most recently, Baker Hughes data showed the US rig count falling to a fresh eighteen-month low, down 10 to 632 (oil 8, gas 2) for its 16th weekly decline in 17 weeks.
  • Earlier, Turkey is looking to broker a deal with the central Iraqi government and the Kurdistan Regional Government (KRG) to restart exports via the Ceyhan pipeline, according to Bloomberg.
  • Iran and the US seem to have produced an informal arrangement on oil flows despite no return yet to their lapsed nuclear agreement according to Bloomberg.
  • Deep OPEC production cuts and strong product demand are supportive of tighter balances and stronger prices in the second half of the year according to a Morgan Stanley client note.
  • WTI is +1.0% at $79.84 and remained above support at $77.48 (50-day EMA) despite its intraday slide. Resistance is seen at $81.75 (Aug 21 high).
  • Brent is +1.4% at $84.54, holding above support at $81.75 (50-day EMA) whilst resistance remains at $85.86 (Aug 21 high).
  • Gold is -0.2% at $1913.12 although is recovering as the USD gives back some its earlier gains. The trend outlook remains bearish with support at $1897.7 (Aug 23 low) although breach of resistance at the 20-day EMA this week sees resistance at $1931.4 (50-day EMA).
  • Weekly moves: WTI -1.7%, Brent -0.3%, Gold +1.3%, US nat gas -0.5%, EU TTF nat gas -4.5%.

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