OIL: Prices Rebound Supported By Short Covering Ahead Of US Hurricane

Oil prices unwound a large share of Tuesday’s drop on better risk appetite, expectations the Fed will cut in September following CPI data close to expectations and concerns over Hurricane Francine, which drove short covering, given the extent of recent selling. The USD index finished down 0.1%.

• WTI rose 2.5% to $67.38/bbl on Wednesday recovering from a low of $65.63 earlier. It then rose to a high of $67.97. It is currently slightly lower at $67.32. The benchmark remains in a bearish condition with initial support at 65.27. Resistance is at $69.08.
• Brent increased 2.2% to $70.22/bbl after a low of $69.00 and then high of $71.09. Tuesday’s sharp sell-off reinforced the bearish price sequence of lower lows and lower highs. Initial support is at $68.68 with resistance at $72.28.
• EIA inventories rose 833k barrels last week, the first increase since mid-August, with gasoline up 2.31mn and distillate +2.31mn. Refinery utilisation fell 0.5pp to 92.8%. Both gasoline and distillate demand were lower as the holiday season finished.
• Hurricane Francine made landfall in Louisiana today. 39% of Gulf of Mexico oil production has been shut because of the storm, according to Benzinga. The question now is how long will the outage last. Also around eight land-based refineries are in Francine’s possible path.