We have highlighted our bearish view on oil in the last few months and would like to give a short update:
1. Both our fundamental-macro and market activity-based processes suggest further downside pressure on crude prices
2. In aggregate, a busy week of data was marginally more bearish
For access to our previous (and lengthier) notes, please see the link below published last week
MONDAY: Drilling productivity report from the EIA which showed a month-over-month production per rig increase for nearly all major shale plays:
- Bakken: +7K B/D to 543K
- Eagle Ford: +9K B/D to 550K
- Haynesville: flat at 24K B/D
- Marcellus: +1K B/D to 33K
- Niobrara: +7K B/D to 407K
- Permian: +3K B/D to 179K
- Utica: +7K B/D to 201K
WEDNESDAY: OPEC production data for the month of October which was largely unchanged with no signs of under the radar production cuts from the biggest producers:
- Non-OPEC supply expectations held flat m/m: +1.68M B/D full year 2014
- Global demand growth held flat m/m: +1.05MM B/D full year 2014
- Demand for OPEC crude for 2014 is an estimated 29.5MM B/D and OPEC produced 30.25MM B/D on average in October
High-level notes from the OPEC report:
- The +1.05MM B/D in estimated demand assumes Q4 will see the highest growth rates
- 2015 estimates for the non-OPEC supply assume a sharp deceleration in growth in 2015 (+1.24MM B/D 2015 vs. +1.68MM B/D in 2014)
THURSDAY: DOE U.S. Inventory data revealed a domestic crude and gasoline inventory build:
- DOE Change in U.S. Gasoline Inventories +1805K vs. -1378K prior (-54.55K est.)
- DOE Change in Cushing, OK Crude Inventories +1704K vs. -551K prior
From a quantitative perspective, all of our contributing proprietary processes are signaling continued pressure to the downside in the immediate and intermediate-term.
WTI found support post-DOE report right at the low-end of our immediate term risk range and looks oversold on the day. The intermediate and longer-term bearish set-up is firmly intact, and resistance levels over these longer durations have moved lower week-over-week.
As always, please reach out with any questions or comments.
Ben Ryan
Analyst
