United States Oil (USO) falls 1% as focus shifts to high U.S. fuel stocks
Oil prices fell about 1% on Monday as Middle East tensions eased and investors turned their focus to lackluster seasonal demand following last week’s bearish U.S. report showing a large fuel stockbuilds.
Brent crude <LCOc1> settled down 78 cents at $64.20 per barrel. West Texas Intermediate (WTI) crude <CLc1> settled at $58.08 a barrel, down 96 cents.
Thin U.S. refinery margins for petroleum products have sapped crude prices, particularly as winter demand for heating oil has disappointed suppliers and gasoline margins have weakened, analysts said.
“It’s hard for crude oil to go higher if refiners continue to lose money or at best break even on gasoline,” said Tom Kloza, global head of energy analysis at the Oil Price Information Service (OPIS).
U.S. gasoline stocks rose by the most in one week in four years, surging by 9.1 million barrels in the week to Jan. 3, the U.S. Energy Information Administration reported last week. Total motor gasoline inventories were about 5% above the five-year average for this time of year, it said.
Distillate stockpiles, which include diesel and heating oil, rose by 5.3 million barrels in the week, versus expectations for a 3.9 million-barrel rise, the data showed.
On Monday, the U.S. heating oil crack spread <HOc1-CLc1>, a measure of the profit margin for refining crude into diesel or heating oil, fell to $21.56, the weakest in almost five months.
“Heating oil has been the worst performer in the middle of winter, when it’s supposed to be the best. The heating oil crack is just getting killed,” said Robert Yawger, director of energy futures at Mizuho in New York, adding lackluster demand for the product has weighed on crude prices.
U.S. crude inventories were expected to have fallen last week, while gasoline stocks were set to gain for the tenth straight week, a preliminary Reuters poll showed on Monday.
Four analysts polled by Reuters estimated, on average, that crude stocks declined by about 800,000 barrels in the week to Jan. 10. Gasoline stocks likely rose by 4 million barrels, according to the estimates.
Oil prices surged to their highest in almost four months after a U.S. drone strike killed an Iranian commander on Jan. 3 and Iran retaliated with missiles launched against U.S. bases in Iraq. But they have slumped again as Washington and Tehran retreated from the brink of direct conflict last week.
Global benchmark Brent touched $71.75 per barrel last week before ending on Friday below $65.
With tensions between the United States and Iran cooling, investors have had time to focus on fundamental demand issues, said John Kilduff, partner at Again Capital LLC in New York.
“The market continues to get a sense of relative oversupply, and this winter has been a bust in the Northern Hemisphere. There’s been an abject lack of heating oil demand,” Kilduff said.
A U.S.-China trade deal is due to be signed in Washington on Wednesday. The Trump administration has invited at least 200 people to a ceremony for the signing, but the two nations have not yet finalised details of what will be signed, White House officials said on Friday.
“We suspect that agreement is already largely discounted in the price level, and is unlikely to provide a strong boost to oil prices,” global oil strategist at BNP Paribas in London Harry Tchilinguirian told the Reuters Global Oil Forum.
Overall, the bias in prices is: Sideways.
The projected upper bound is: 12.76.
The projected lower bound is: 11.67.
The projected closing price is: 12.21.
A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 4 white candles and 6 black candles for a net of 2 black candles. During the past 50 bars, there have been 28 white candles and 22 black candles for a net of 6 white candles.
A falling window occurred (where the bottom of the previous shadow is above the top of the current shadow). This usually implies a continuation of a bearish trend. There have been 3 falling windows in the last 50 candles–this makes the current falling window even more bearish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 11.6883. This is an oversold reading. However, a signal is not generated until the Oscillator crosses above 20 The last signal was a sell 8 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 39.21. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a sell 4 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -175.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a sell 3 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 3 period(s) ago.
Rex Takasugi – TD Profile
UNTD ST OIL FUND closed down -0.210 at 12.200. Volume was 1% below average (neutral) and Bollinger Bands were 20% narrower than normal.
Open High Low Close Volume___
12.310 12.310 12.160 12.200 22,870,664
Short Term: Oversold
Intermediate Term: Bullish
Long Term: Bullish
Moving Averages: 10-period 50-period 200-period
Close: 12.77 12.29 12.06
Volatility: 29 29 39
Volume: 22,530,284 19,513,264 25,390,884
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
UNTD ST OIL FUND gapped down today (bearish) on normal volume. Possibility of a Runaway Gap which usually signifies a continuation of the trend. Four types of price gaps exist – Common, Breakaway, Runaway, and Exhaustion. Gaps acts as support/resistance.
UNTD ST OIL FUND is currently 1.2% above its 200-period moving average and is in an upward trend. Volatility is extremely high when compared to the average volatility over the last 10 periods. There is a good possibility that volatility will decrease and prices will stabilize in the near term. Our volume indicators reflect volume flowing into and out of USO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bullish on USO and have had this outlook for the last 51 periods.