Oil Traders Pointing To Economic Measures And Divining A Drop In Oil Demand

Gasoline futures continue sliding this morning, dropping over 2% so far in pre-market trading, leading the energy complex lower. The prompt month RBOB contract started its bearish trendline Monday of last week and has only seen three days of slight gains since. On the charts, this morning’s price action has been buoyed by its 50-day moving average and if that support level is broken, a test of the 100-day MA at the $2.65 level will seem imminent.

Dismal PMI (Purchasing Managers’ Index) figures from some of the world’s largest producers is being blamed for today’s bearish sentiment in energy markets. The index, used to measure a country’s manufacturing productivity, dropped for a third straight week in Japan, and fell more than expected for European countries. With not a lot else going on this morning, oil traders are pointing to these economic measures and divining a drop in oil demand.

Certainly not abating the bearish sentiment, the EIA highlighted their estimate for an increase in oil production for 2023-2024 that they originally published earlier this month in their Short Term Energy Outlook. The Agency attributes the anticipated growth to an increase oil well productivity, particularly in the Permian Basin. Counter to today’s headlines, lower global inventories and generally higher prices are what the EIA foresees for the next couple of years.

Tropical Storm Harold made landfall on South Padre Island yesterday, located about 40 miles south of Corpus Christi. Although not much has come from hurricane activity so far this year, how rapidly the Atlantic basin produced five major storms in the span of a week is sounding the klaxon that more is to come.

The American Petroleum Institute published their US energy inventory estimates yesterday afternoon with the most notable of the headline values being a ~2.4-million-barrel drop in crude oil stockpiles. Gasoline stocks was the only builder, adding 1.9 million barrels last week while distillates stayed in the background, dropping 150,000 barrels. The official report published by the Department of Energy is due out at its normal time this morning (9:30 CDT).

Click here to download a PDF of today's TACenergy Market Talk.