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US Gulf Coast braces for hurricane, WTI bulls getting in their buy orders

  • WTI prices are now offering a trade setup to the upside following 2% rally on Tuesday.
  • US storms in the Gulf have forced shutters of oil and gas production, pressuring prices higher. 

Hurricane supply disruptions in the United States are underpinning the price of oil mid-week.

Hurricane Sally’s expected landfall on the US Gulf Coast has led to more than a quarter of US offshore oil and gas production shuttering as well as key exporting ports.

The storm’s trajectory has shifted east toward western Alabama, at least sparing some Gulf Coast refineries from high winds.

The unpredictability about oil production in the Gulf is bullish for oil prices.

On the other hand, what is not so appealing for the bulls are the latest call from the International Energy Agency (IEA) which has trimmed its 2020 outlook by 200,000 barrels per day (bpd) to 91.7 million bpd, citing caution about the pace of economic recovery.

We expect the recovery in oil demand to decelerate markedly in the second half of 2020, with most of the easy gains already achieved,

 the IEA said in its monthly report.

The agency said commercial oil stocks in the developed world hit an all-time high of 3.225 billion barrels in July, and cut its forecast for implied stock draws for the second half of the year.

Reuters reported that the IEA’s demand revision aligns with forecasts from major oil industry producers and traders.

OPEC downgraded its oil demand forecast and BP BP.L said demand might have peaked in 2019.

World oil demand will tumble by 9.46 million bpd this year, the Organization of the Petroleum Exporting Countries said in a monthly report on Monday, more than the 9.06 million bpd decline OPEC expected a month ago.

Bulls looking for a way to buy-in to the bullish technicals

Meanwhile, despite the medium-term bearish fundamentals, there still could be an opportunity to take part in what is expected to be a relatively short term swing trade within the following bullish technical analysis:

  • WTI Price Analysis: Bulls back in the game, back to the drawing board for 1.3 R/R setup

4HR chart

The 2% rally meeting resistance suggests a correction could be on the way which would satisfy a buy limit strategy as outlined in the above 4-hour chart.

On Tuesday, in the United States, crude inventories fell by 9.5 million barrels in the week to Sept. 11 to about 494.6 million barrels, data from industry group the American Petroleum Institute showed on Tuesday. Analysts had expected a build of 1.3 million barrels.

US government data on stockpiles is due on Wednesday which could be the make or break for this setup as traders wait in anticipation of OPEC later in the week.

Still, the meeting of the OPEC+ joint ministerial committee on Thursday is not expected to make recommendations for deeper output cuts, but focus rather on compliance and compensation mechanisms for its current cuts,

sources told Reuters.




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