Demand Outlook Weighs On Crude, US Inventory Drawdown Continues Though

Oil prices fell again on Wednesday and look set to fall in August, as concerns grow over both cyclical and structural demand. The market has become more pessimistic on the outlook and looked through another US crude inventory drawdown and continued political issues impacting Libyan output. The US dollar was stronger also weighing on crude (USD BBDXY +0.35%).

• WTI fell 1.5% to $74.38/bbl after a low of $73.82, but has started today slightly higher at $74.50. The benchmark is below initial support at $75.04, opening up the bear trigger at $70.88. It is currently down 3.2% this month. Key resistance is at $78.54.
• Brent (Nov contract) is down 1.6% to $77.42/bbl to be 3.5% lower in August. It fell to a low of $77.14 and then recovered slightly.
• The EIA reported a US crude drawdown of 846k barrels last week, which was larger than expected. There has been a build in only one week since the start of July. Gasoline stocks fell 2.2mn but distillate rose 275k. Refinery utilisation rose 1pp to 93.3%, highest since mid-July. The data continue to point to robust US demand.
• Libya had been producing around 1mbd before the eastern government in Benghazi had halted oil operations over a dispute on the control of the central bank which manages the country’s oil revenues. Bloomberg is reporting that Libya’s output has almost halved just this week. OPEC next meets on October 2 and Libyan developments, if continuing, may support its decision to reduce output cuts.