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Saudi Arabia Cuts Prices To Asian And American Buyers

Tuesday, Sep 8 2020
Market Talk

Both equity and energy markets are coming under heavy selling pressure this week as various fears over economic activity seem to be taking control of the action. 

Saudi Arabia cut their prices to Asian and American buyers, in another signal that the market is oversupplied. Adding to the negative sentiment, Chinese oil imports slowed last month, after reaching record highs this summer. 

Each of the petroleum futures contracts seems to have some version of a rounding-top pattern in place since they are breaking lower from their sideways range, which suggests we could see much lower prices this fall. Both RBOB and ULSD prices are just a few cents from their June lows, and whether or not that range provides any support may well determine whether or not we see sub-$1 pricing in September.

This week marks the traditional peak for Atlantic hurricane season, and this record-setting year is holding true to form with two tropical storms (Paulette & Rene) moving across the open ocean, and two more potential systems being tracked. The good news is neither of the named systems appear to be a threat to the U.S. coast and the system forming off the Caroline coast most likely won’t have time to develop into a major storm. 

Baker Hughes reported a net increase of one oil rig last week, with most of the major shale basins holding steady and not seeing any change in their count for the week.

Money managers trimmed back their bets on higher petroleum prices last week, but were still holding above-average exposure on WTI and RBOB ahead of this selloff, which could contribute to the move lower if they begin liquidating. The large funds did move ULSD positions back into a net short position last week, and those positions are benefiting from this move lower.

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

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