Don’t forget the upcoming Economics of Oil and Gas Roundtable, October 25, 2018. Sign-up today at tim@matadoreconomics.com

 

Good Friday Morning my good friends, it’s officially the end of Summer, the last peak of the drive season! Normally, prices begin their fall toward the Winter Blends, but many are questioning whether we’ll trade a normal seasonal pattern this year. Supply concerns for 2019 are driving prices to a close above $70 on the WTI and approaching $80 in the Brent. Gasoline prices are rising as well as we are watching the out months, struggling to pull back below $2 per gallon! We’ll probably see a bit of profit taking because of the holiday weekend and the fact that there’s trouble brewing in the tropics! Additionally yesterday’s GDP at 4.2% is a signal that the balance of 2018 will provide very strong demand for crude oil and the refined products. Plus we’re watching to see what the Baker Hughes Rig Count has to say!

In a MarketWatch story from Mark Decambre and Neanda Salvaterra, “Crude-oil futures early Friday retreated from their highest levels in about six weeks amid escalating trade tensions, but the commodity was set for a weekly advance as investors watch for a final inventory report to wrap up trade in August. Industry participants will wait for the weekly Baker Hughes BHGE, -0.06% rig-count data which will be released at 1 p.m. Eastern. Last week’s report showed the number of active U.S. rigs drilling for oil fell by nine to 860 and the total active U.S. rig count, which includes oil and natural-gas rigs, fell by 13 to 1,044. October West Texas Intermediate crude on the New York Mercantile Exchange CLV8, -0.37% the U.S. oil benchmark, was off 51 cents, or down 0.7%, at $69.74 a barrel, a day after closing above $70 a barrel for the first time since July 20, according to Dow Jones Market Data. Global benchmark October Brent crude LCOV8, -0.36% which expires on Friday, gave up 51 cents, or 0.7%, at $77.51 a barrel on ICE Futures Europe. WTI is on pace to post a weekly gain of 1.5%, and a monthly rise of 1.4%, while Brent is set for a weekly rise of 2.2% and a monthly climb of 4.4%. Trading on Friday is likely to be volatile with volumes anticipated to be low ahead of a three-day holiday in the U.S. Most markets will be closed for trade on Monday in observance of Labor Day. Crude futures won’t settle on Monday. Crude moves this week have been mostly supported by potential disruptions to global crude supplies, including U.S. sanctions on Iran that take effect in early November. On top of that, inventories in the U.S. have demonstrated signs of tightening. Earlier in the week, the Energy Information Administration reported that U.S. crude supplies declined by 2.6 million barrels for the week ended Aug. 74 24. That followed a drop of 5.8 million barrels reported by the EIA the week before. Trade moves may be cautious with investors keeping one eye on recent reports suggesting that President Donald Trump may yet follow through with tariffs on China, despite some signs that Beijing and Washington were angling toward productive negotiations to resolve differences over trade imbalances. Bloomberg on Thursday reported that Trump wants to move ahead with his plan to place tariffs on $200 billion in additional Chinese imports as early as next week. Companies have until Sept. 6 to comment on the proposed duties, and Trump wants to impose the tariffs once that deadline passes. Trade disputes, if they escalate between the world’s biggest economic superpowers, are seen has having the potential to disrupt the global economy and hurt demand for crude. “Crude oil traded to a high of 70.36 today; [before] falling under the spell of the ‘trade war’ global pullback,” said Robert Yawger, director of energy at Mizuho USA in a Friday note. Market participants are also keeping one eye on a potentially supply-impacting tropical storm in the Atlantic off the coast of Africa near Senegal. Elsewhere in the energy complex, September gasoline RBU8, +0.08% fell 0.7% to $2.128 a gallon and September heating oil HOU8, 0.37%  slipped 0.5% to $2.238 a gallon. The September contracts expire at Friday’s settlement. At the U.S. retail level, AAA said this week that it expects prices for gasoline to drop to an average $2.70 a gallon this fall, in part due to expectations for a decline in consumer demand after Labor Day. October natural gas NGV18, +1.29% meanwhile, added 1% to $2.903 per million British thermal units, up 0.4%.”

 

Timbo’s Macro’s: With this weeks very positive news on the macroeconomic side of things, markets are happy about this fundamental stability, what they don’t like is the nervousness the trade war/tariff war footing we are currently on and the chaos it is creating traders! Today we get the Baker Hughes Rig Count. With the volatility we’ve seen in these numbers over the last few weeks, all I have is a W. A. G. on what we’ll see and that’s worth what you pay for that advice. At 08:00 CDT, WTI was trading off 27 with ULSD was off 95 and RBOB was off 24. Gold was trading up $3.20 and the value of the US $$ Index is up a bit at 94.903. Bitcoin is slipping again today as well down $61 and just below $7,000.

 

Hurricane Season: We have another area developing and now markets are beginning to pay attention to the tropics, even with a high probability that both of these will miss the Gulf and the US.

Technicals

 

INO Morning Energy Commentary: October NYMEX crude oil was slightly lower overnight. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near-term. If October extends the rally off August’s low, June’s high crossing at 71.29 is the next upside target. Closes below the 20-day moving average crossing at 67.27 would signal that a short-term top has been posted. First resistance is the reaction high crossing at 71.05. Second resistance is June’s high crossing at 71.29. First support is August’s low crossing at 63.89. Second support is June’s low crossing at 62.60.

October heating oil was slightly lower overnight as it consolidates some of the rally off August’s low. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near-term. If October extends the rally off August’s low, May’s high crossing at 229.92 is the next upside target. Closes below the 50-day moving average crossing at 215.64 would confirm that a short-term top has been posted. Closes above May’s high crossing at 229.92 or below July’s low crossing at 205.41 are needed to confirm a breakout of the May-August-trading range and point the direction of the next trending move. First resistance is Thursday’s high crossing at 226.47. Second resistance is May’s high crossing at 229.92. First support is the 50-day moving average crossing at 215.64. Second support is August’s low crossing at 208.05.

October unleaded gas was slightly lower overnight as it consolidates some of the rally off August’s low. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near-term. If October extends the rally off August’s low, July’s high crossing at 204.04 is the next upside target. Closes below the 20-day moving average crossing at 194.10 would confirm that a short-term top has been posted. First resistance is the late-July high crossing at 201.57. Second resistance is July’s high crossing at 204.04. First support is August’s low crossing at 186.62. Second support is July’s low crossing at 185.93.

October Henry natural gas was higher overnight as it consolidates some of the decline off August’s high. Stochastics and the RSI have turned bullish signaling that a low is in or near. Closes above the 20-day moving average crossing at 2.921 are needed to confirm that a short-term low has been posted. If October resumes the decline off August’s high, August’s low crossing at 2.751 is the next downside target. First resistance is the 20-day moving average crossing at 2.921. Second resistance is the 87% retracement level of the June-July-decline crossing at 2.982. First support is Wednesday’s low crossing at 2.830. Second support is August’s low crossing at 2.751.

 

INO Morning Currency Commentary: The September Dollar was steady to slightly higher overnight as it extends this week’s trading range. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near-term. If September extends the decline off August’s high, the late-July low crossing at 93.87 is the next downside target. Closes above the 20-day moving average crossing at 95.41 would temper the near-term bearish outlook. If September resumes this year’s rally, monthly resistance crossing at 97.70 is the next upside target. First resistance is August’s high crossing at 96.87. Second resistance is weekly resistance crossing at 97.70. First support is the 25% retracement level of the January-August-rally crossing at 94.52. Second support is the late-July low crossing at 93.87.

The September Euro was lower overnight as it consolidates some of the rally off August’s low. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible. If September extends the rally off August’s low, the late-July high crossing at 117.90 is the next upside target. Closes below the 20-day moving average crossing at 115.65 would temper the near-term friendly outlook. If September renews this summer’s decline, the 75% retracement level of the 2016-2018 rally crossing at 112.78 is the next downside target. First resistance is the late-July high crossing at 117.90. Second resistance is July’s high crossing at 118.52. First support is August’s low crossing at 113.28. Second support is the 75% retracement level of the 2016-2018 rally crossing at 112.78.

The September British Pound was slightly lower overnight as it consolidates some of the rally off August’s low. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near-term. Closes above the 50-day moving average crossing at 1.3064 would signal that the short-term trend has turned sideways to higher while opening the door for additional gains near-term. If September renews the decline off July’s high, the 87% retracement level of the 2016-2018-rally crossing at 1.2600 is the next downside target. First resistance is the 50-day moving average crossing at 1.3064. Second resistance is the reaction high crossing at 1.3240. First support is August’s low crossing at 1.2678. Second support is the 87% retracement level of the 2016-2018-rally crossing at 1.2600.

The September Swiss Franc was higher overnight as it extends the rally off August’s low. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near-term. If September extends the aforementioned rally, the 38% retracement level of the February-July-decline crossing at 1.0383 is the next upside target. Closes below the 50-day moving average crossing at 1.0131 would confirm that a short-term top has been posted. First resistance is the overnight high crossing at 1.0373. Second resistance is the 38% retracement level of the February-July-decline crossing at 1.0383. First support is the 10-day moving average crossing at 1.0231. Second support is the 50-day moving average crossing at 1.0131.

The September Canadian Dollar was lower overnight as it consolidates some of the rally off June’s low. Stochastics and the RSI are turning bearish signaling that a short-term top might be in or is near. Closes below the 50-day moving average crossing at 76.38 would confirm that a short-term top has been posted. If September extends the rally off August’s low, June’s high crossing at 77.94 is the next upside target. First resistance is Tuesday’s high crossing at 77.63. Second resistance is June’s high crossing at 77.94. First support is August’s low crossing at 75.93. Second support is July’s low crossing at 75.31.

The September Japanese Yen was slightly higher overnight. Stochastics and the RSI are oversold and are turning neutral to bullish signaling that a low might be in or is near. If September renews the rally off July’s low, the 38% retracement level of the March-July decline crossing at 0.9172 is the next upside target. If September extends the decline off August’s high, July’s low crossing at 0.8867 is the next downside target. First resistance is last-Tuesday’s high crossing at 0.9126. Second resistance is the 38% retracement level of the March-July decline crossing at 0.9172. First support is August’s low crossing at 0.8943. Second support is July’s low crossing at 0.8867.

 

Market Snapshot

Symbol Open High Low Last Change %
Euro 1.166395 1.168950 1.165655 1.166445 +0.000050 0.00%
US Dollar 94.738 94.911 94.547 94.903 +0.200 +0.26%
Bonds 144.25000 144.71875 144.12500 144.65625 +0.43750 +0.30%
Crude Oil 70.06 70.36 69.64 70.01 -0.24 -0.34%
Natural Gas 2.886 2.916 2.882 2.912 +0.038 +1.32%
Gold 1202.150 1208.185 1201.600 1206.515 +4.365 +0.36%
Silver 14.57260 14.70950 14.56275 14.66200 +0.08940 +0.61%
Dow Indu 26099.01 26104.37 25934.80 25986.92 -137.65 -0.53%
S&P 500 2908.94 2912.46 2895.22 2901.13 -12.91 -0.44%
Nasdaq 8094.20 8133.30 8069.57 8088.84 -20.85 -0.26%
Emini Dow 25974 26029 25936 25947 -63 -0.24%
Emini S&P 2898 2904 2895 2896 -6 -0.21%
Emini Nasdaq 7641.75 7663.25 7635.25 7640.75 -8.25 -0.11%
Bitcoin Bitstamp BTC 6972.77 7018.15 6792.85 6911.23 -61.54 -0.88%

 

S&P 500

2901.13

-12.91 -0.44%

Dow Indu

25986.92

-137.65 -0.53%

Nasdaq

8088.84

-20.85 -0.26%

Crude Oil

70.01

-0.24 -0.34%

Gold

1206.515

+4.365 +0.36%

Euro

1.166445

+0.000050 0.00%

US Dollar

94.903

+0.200 +0.26%

 

 

Tim Snyder, President

Matador Economics, Inc.

860 W Airport Freeway, Suite #102

Hurst, Texas 75056

(806) 441-7721

tim@matadoreconomics.com

Tim Snyder 8 31 18 Matador Charts