Local Oil Names Drop Sharply After WTI Spikes Lower

Posted on | by Todd

Shares of ASX oil names are under pressure in early trade as West Texas Intermediate Crude Oil (WTI) prices dropped over  4% overnight.

WTI prices fell by close to $4.00 per barrel to $70.40 as a confluence of bearish news hit the market.

Increased trade friction between the US and China pushed WTI lower in Asian tarde, while news that Liyba and Saudi Arabia have increased production by a combined 800,000 barrels per day pushed the market through key support levels.

As illustrated in the chart below, WTI has rallied more than $10.00 over the last 5 weeks, which now places initial support $3.00 lower near $67.00.

Similarly, local oil names, OSH, STO, WPL and ORG have rallied over the last month and appear to have more downside price potential over the near-term.

OSH will announce their quarterly production report next Tuesday and STO and WPL will release their reports next Thursday.

We have traded both sides of these names over the last 12 months and will update with specific entry levels near lower technical support areas over the medium-term.

WTI Crude Oil

Origin Energy

Oil Search

Santos

 

Woodside Petroleum

WPL Gets A Boost From WTI

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Shares of WPL reached a high of $29.25 in early trade as West Texas Intermediate (WTI)  crude oil posted its largest single session gain in over three weeks.

The front month WTI contract rose $1.30, or 2.2%, following a report that crude stocks have dropped by 600,000 barrels at the US storage hub in Cushing, Oklahoma.

WPL is part of our ASX Top 20 Model Portfolio and our ALGO engine triggered a buy signal on February 20th at $29.10.

The stock has been a tepid performer over the last few weeks after announcing a rights issue and going ex-dividend.

However, the technical picture is improving and a break back above the $29.66 level will likely extend into the gap from $30.90 from mid-February.

Woodside Petroleum

 

 

 

 

Crude Oil Rally Pauses on Trump’s USD Comments

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Since posting an intra-day low of $55.80 on December 6th, the price of West Texas Intermediate (WTI) crude oil has rallied almost 20% to hit a 3-year high of $66.60 in NY trade last night.

The sharp rise in WTI has had 2 primary tailwinds: a seasonal drawdown of crude oil in storage and a 4% drop in the USD Index.

However, this week’s events could diminish, or possibly reverse, those 2 market impulses.

According to the American Petroleum Institute (API), the amount of WTI in storage has dropped for 11 consecutive weeks. This week’s drawdown was 1.1 million barrels compared to an expected reduction of 2.3 million barrels.

In addition, the recent rise in WTI has seen the US rig count rise from 789 in early December to 939 this week. More production from rigs online will likely break the string of weekly drawdowns in the near-term.

With respect to the USD, Mr Trump told CNBC yesterday that the Greenback will strengthen over time and that recent remarks made by Treasury Secretary Steve Mnuchin about a weakening USD were misunderstood.

Our ALGO engine currently has a sell signal in OSH from the $7.60 area. A material correction in the WTI price could see the stock trade back to November support level near $7.00.

Oil Search

 

Crude Oil Slips Lower After IEA Report

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Spot Crude Oil prices fell sharply in overnight trade after a report from the International Energy Agency (IEA) said that global oil demand is much weaker than OPEC consensus figures and will weaken further in 2018.

The report also showed that US shale, and other non-OPEC producers, will add an additional 1.4 million barrels per day of supply on top of the fall in demand.

These comments pushed the front-month WTI Crude contract down over 2% to $55.10.

Oil traders have gained confidence in the rebalancing effort lately, with impressive OPEC compliance and a high likelihood that the cartel extends its production cuts, perhaps through the end of 2018, when they meet later this month.

We continue to like WPL and ORG as our preferred buy-side opportunities.

Crude Oil Firms After OPEC Comments

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The price of WTI Crude Oil rose over 2% on Friday as comments from several OPEC ministers reaffirmed their commitment to rein in excess output from OPEC and non-OPEC producers.

The front-month November contract posted a 6-month high at 54.20 as the apparent adherence to the production cuts creates a solid pretext for the November 30th OPEC meeting in Vienna.

OPEC and other major producers including Russia have pledged to reduce production by around 1.8 million barrels per day to drain a global supply glut.

The next key resistance level is the February 23rd high of $54.90.

WTI Crude Oil

Crude Slides Lower On Saudi Comments

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Spot Crude Oil prices dropped over 2% after comments from a Saudi official that the November OPEC meeting may not result in an extension to the current production cut agreement.

This announcement comes as the return of supply from Libya and increasing rig counts in the USA have kept prices under pressure.

For the week, the front month November Crude Oil contract fell close to 5%.

Technically, Friday’s settlement at $49.25 is the first close below the 200-day moving average since September 10th, which suggests near-term range extension to the downside.

Our ALGO engine triggered a sell signal in OSH on September 28th at $7.10, and a sell signal in STO on September 26th at $4.20.

These trades have been slow to develop but we maintain our downside targets of $6.30 in OSH and $3.35 in STO

Oil Search

Santos

ETF Update: OOO Is Tracking Crude Oil Higher

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Prices of West Texas Intermediate (WTI) Crude Oil moved higher in New York trade, extending the recent rebound to a sixth straight session after a decline in US crude production eased concerns about deepening oversupply.

WTI futures settled up 19 cents at $44.93 per barrel after hitting a two-week high of $45.45 earlier in the day.

Supply disruptions in the Gulf of Mexico from Hurricane Cindy, as well as, increased demand for gasoline in front of the long July 4th weekend have also supported the move higher in Crude.

On June 23, we posted a report suggesting Crude Oil prices had become technically oversold and a reversion higher was likely. We are still looking for a extension of the move higher into the $46.50 area.

Investors looking to profit from higher Crude Oil prices can look to buy the BetaShare ETF with the symbol: OOO.

We started adding OOO to client portfolios in the $12.30 area.

We calculate that when WTI trades back to $46.50, the price of OOO will be near the $14.60 level, which is a reasonable area to take profits.

BetaShare ETF: OOO

 

 

 

 

OVERNIGHT News: FOMC and Crude Oil

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The FOMC announcement to raise the target Fed Funds rate by 25 basis points to 1.25% was largely priced into the market.

However, the “hawkish” guidance  about further upward adjustments and the specific plans to reduce the FED’s $4.5 trillion balance sheet have raised concerns about current stock market valuations and the impact of tighter monetary conditions.

The major US indexes were mixed with the NASDAQ down .50%, THE Dow Jones 30 up .25% and the SP 500 down .10%.

US Energy stocks were all lower as Crude Oil prices slumped on a downbeat assessment from the IEA and increased production from both the US and OPEC nations.

The front month WTI Crude contract closed down over 3% to $44.65, which is the lowest closing price in over 18 months.

As a result, shares in both BHP and Oil Search have opened more than 2.5% lower.

Chart – Dow Jones

 

Crude Oil Dips Below $48.00

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West Texas Intermediate Crude Oil prices dropped below $48.00 for the first time in over a month as rising output in the USA, Canada and Libya have more than offset the production cuts agreed to by OPEC members last November.

At one point in the NY session Crude prices were over 3% lower to $47.40 before weekly US inventory data lifted the market back over $47.90.

we have been following the BetaShare Oil ETF called OOO. It has traded in a wide range between $17.50 and $13.80 this year as crude prices have fluctuated.

Oil Search Points Lower On Weaker Crude Prices

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After falling over 7% last week, WTI Crude Oil dropped another 1% last night to trade at a four-week low of $49.05.

Concerns of oversupply in both Crude and Gasoline are dragging prices down as both products are now trading below their 30 and 50-day moving averages.

This weakness in both the technical and fundamental indicators will likely put downside pressure on the shares of Oil Search.

On April 19th, Oil Search announced a quarterly report which showed a 2% decline in total production for the March quarter, along with a 1% decline in total sales revenue.

Based on these data sets, we would expect OSH shares to trade back down to the initial support at $6.70 in the near term.

Oil Search