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Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 13 December 2017 at 15:00 GMT

Oil in crude health but year-end profit-taking is emerging

Head of Commodity Strategy / Saxo Bank
Denmark
  • Supply disruption rally in Brent fades
  • Year-end profit-taking starting to emerge
  • EIA stock update and IEA report in focus

Crude oil
 Inventory and product data are the oil market's focus today. Photo: Shutterstock

By Ole Hansen

Crude oil's roller coaster ride looks set to continue with the focus in the market alternating between pipeline disruptions, funds booking profits ahead of year-end, and the weekly dose of US inventory data. 

Adding to this, we have monthly oil market reports from all the three major institutions – the Energy Information Administration, Opec, and the International Energy Agency.

The most serious supply disruption of the year lifted Brent crude to a 2½-year high yesterday before running out of steam as traders began booking profit ahead of year-end. The profit-taking occurred after the IEA said it was monitoring the closure of the Forties crude pipeline but that no immediate need for action was required with the market currently being well supplied. 

Last night the American Petroleum Institute reported a bigger-than-expected reduction in crude oil stocks for a second week in a row and this helped support the recovery seen today. A Bloomberg survey pins the crude stock draw at 2.9 million barrels, and this should be more than offset by another rise in product stocks. 

Crude oil production and refinery activity, together with oil and product trade, are data which as usual will attract attention once the Weekly Petroleum Status report is out at 1530 GMT.

EIA survey and recent results













The EIA also released its monthly Short Term Energy Outlook yesterday, which was followed up today by Opec's Monthly Oil Market Report. Both increased non-Opec supply growth next year while keeping demand growth close to unchanged. 

The IEA will publish its Oil Market Report Thursday at 0900 GMT.

Oil market reports
 





A decline in the open interest on the Brent crude oil future yesterday is pointing towards some year-end profit-taking after the latest leg up in prices. What part this played in yesterday's top-to-bottom move, however, will only be revealed when the Commitment of Traders report is released this Friday after the close. 

In Brent crude, the uptrend from the June low remains in crude health, not least supported by the multiple supply disruptions and decline in Venezuelan production witnessed during the past three months. 

After hitting a fresh 2½-year high yesterday, profit-taking took it back down to the 20-day moving average at $63/barrel which also ties in with the 61.8% retracement of the December low to high. 

A break below this level could see it target a key area of support just above $61/b.

Brent Crude oil, first month cont.
Source: Saxo Bank

— Edited by Michael McKenna

Ole Hansen is head of commodity strategy at Saxo Bank

13 December
Ole Hansen Ole Hansen
A bigger than expected decline in crude oil stocks being off-set by an equally bigger build in gasoline stocks. Production jumped 73k bpd while refinery demand slowed more than expected. Relatively subdued initial reaction.
13 December
Ole Hansen Ole Hansen
EIA report in charts

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