Supply/Demand Developments Drive Stronger Crude In July

Optimism regarding the demand outlook from the US and China in addition to signs that supply is tightening drove oil prices higher last week. They rose around 0.7% on Friday to be up over 4% on the week. The USD index was down 0.1% with US data coming in close to expectations.

• WTI broke through $80 on Friday and held the gains to finish at $80.67/bbl, close to the intraday high of $80.71. It has started the week slightly lower and is currently around $80.50. Key resistance is at $81.44, April 12 high. It is around 14% higher this month. Brent finished at $84.44/bbl, just under the high of $84.50, to be up almost 12% in July. Key resistance is at $85.47.
• Shipping data is showing that Russian seaborne shipments fell to their lowest in 7 months in the week ending July 23. In addition, the energy minister has said that exports will be reduced again in August.
• The WTI prompt spread is signalling a tightening market as it is at its widest backwardation since November, according to Bloomberg. Also physical inventories are down with stocks at Cushing their lowest since May.
• CFTC net oil positions increased to 225.2k last week from 206.1k. Based on relative strength, crude was overbought a number of times last week.