AMERICAS OIL: Americas End of Day Oil Summary: Crude Steady
US OIL: September 22 - Americas End of Day Oil Summary: Crude Steady
WTI crude is relatively steady overall amid Oct expiration, with looming oversupply concerns weighed against supply risks from potential sanctions and strikes on Russian energy infrastructure. Crude remains within the $5/bbl range seen since early August. Resumed weakness could retest $57.71, the May 30 low.
- The EU is considering trade measures to target its remaining Russian oil imports, Bloomberg reported on Saturday citing people familiar with the matter.
- The U.S. has sought to continue pressure on Indian purchases of Russian oil in its latest trade talk efforts sources told Bloomberg on Saturday.
- Strikes were reported at the Saratov and Novokuybyshevsk refineries and an Urals production station in the Samara region.
- Kurdish media are reporting that the Kurdistan Regional Government, Iraq’s Federal Oil Ministry and international oil companies (IOCs) have signed a tripartite agreement which will return oil exports from Kurdistan to Turkey’s Ceyhan port.
- East Russian crude exports have slowed in September by around 100kbd from August's pace of 1.13mn bpd according to Kpler – coming from a sharp drop in ESPO flows (down 300kbd m/m).
- Oil demand in JODI-reporting countries rose by 824 kb/d on the month in July and by 26 kb/d year on year. Crude oil production fell by 441 kb/d from June but rose 1.27 kb/d vs July 2024.
- OIES has maintained a Brent forecast of $69/bbl for 2025 but lowered the 2026 forecast by $1/bbl to $65.5/bbl.
- The trend condition in WTI futures is unchanged - a bear cycle remains intact and the latest recovery is considered corrective. The pullback from the Sep 2 high highlights a possible reversal and the end of a corrective phase between Aug 13 - Sep 2. Initial resistance to watch is $66.03, the Sep 2 high. Key short-term resistance has been defined at $69.36, the Jul 30 high. A stronger resumption of weakness would open $57.71, the May 30 low.
- Cracks are relatively steady overall as the market continues to monitor the impacts of Ukrainian strikes on Russian refineries.
- WTI Oct futures were down 0.1% at $62.64
- WTI Nov futures were down 0.2% at $62.28
- RBOB Oct futures were up 0.4% at $1.98
- ULSD Oct futures were down 0.4% at $2.29
- US gasoline crack up 0.5$/bbl at 20.42$/bbl
- US ULSD crack down 0.4$/bbl at 33.51/bbl
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FED: NatWest Now Sees Cuts In 2025, Starting In September
As with Deutsche earlier, NatWest has changed its Fed call after the Powell Jackson Hole speech to reflect a 25bp September cut. Previously, the call was for no cuts in 2025. The new baseline outlook includes further 25bp cuts in December and March, bringing rates closer to neutral ("however, the changing composition of the committee becomes far less clear once Powell term expires in May").
- "While the August jobs and CPI reports will be watched carefully, it is clear to us that Powell has already seen enough to decide renewed action to counter downside economic risks is likely warranted, and so we now look for a 25 basis point rate cut on September 17th.
- "We expect officials will very much downplay the likelihood of a 50bp rate cut leading up to the jobs data, but we have to admit if the report is "weak enough" (e.g., the unemployment rate increases by 0.3pct to 4.5% (where officials had it at year end) anything can happen and wouldn't rule anything out. However, given the latest pivot and with financial markets pricing (86% of a 25bp rate cut) a lot has to happen (unemployment rate 3-handle and core CPI +0.5%) for the FOMC to undeliver and hold off from a rate cut in September. "
USDCAD TECHS: Bull Cycle Hindered
- RES 4: 1.4111 High Apr 10
- RES 3: 1.4019 38.2% retracement of the Feb 3 - Jun 16 bear leg
- RES 2: 1.3968 High May 20
- RES 1: 1.3925 High Aug 22
- PRICE: 1.3840 @ 16:55 BST Aug 22
- SUP 1: 1.3794 20-day EMA
- SUP 2: 1.3769/22 50-day EMA / Low Aug 22
- SUP 3: 1.3576 Low Jul 23
- SUP 4: 1.3557/40 Low Jul 3 / Low Jun 16 and the bear trigger
Gains this week in USDCAD and the breach of resistance at 1.3879, the Aug 1 high, marked a positive development, however the slippage into the Friday close undermines this sentiment - for now. Moving average studies have crossed and are in a bull-mode position, reinforcing current conditions. An extension higher would signal scope for a climb towards 1.4019, a Fibonacci retracement. On the downside, support to watch lies at 1.3769, the 50-day EMA - a level not yet challenged by the correction lower.
CANADA: Q2 Expected To See GDP Contraction, BOC's Estimate Looks Too Negative
The June retail sales release helps wrap up the last major data before Canadian Q2 GDP is released on Friday August 29.
- Current Bloomberg analyst consensus shows Q2 is expected to show a 0.7% Q/Q annualized contraction, versus +2.2% in Q1. The private sector consensus is more optimistic than the Bank of Canada's -1.5% estimate in its July Monetary Policy Report (which MNI thinks is too low) but the component-by-component breakdown is similar if of differing magnitudes.
- Widely expected are: a softening in household consumption growth (+1.2% in Q1), with a pickup in government spending, continued weakness in fixed investment (-3.0% in Q1) though with residential outperforming business capital formation, and a reversal of Q2's positive contribution from net exports. In short, the data are expected to confirm that trade activity was brought forward to Q1 ahead of tariffs, with the effects reversing in Q2.
- Going forward, the BOC envisages growth resuming in Q3 (+1.0% in its "current tariff" scenario). In the meantime, a weak Q2 reading could provide Governing Council with more conviction to resume easing rates in September, with the July meeting decision noting "If a weakening economy puts further downward pressure on inflation and the upward price pressures from the trade disruptions are contained, there may be a need for a reduction in the policy interest rate".
