Oil: WTI to grind lower towards the $65 in the near-term – TDS

Despite the fact that US product demand is up 354,000 b/d, the oil and total product inventory draw is not enough to keep the current rally. Bart Melek, Head of Commodity Strategy at TD Securities, expects WTI to edge lower towards the $65 level.

See: Brent Oil set to race higher towards the $76.38/77.84 zone – Credit Suisse

Fed’s tapering to be an additional headwind

“OPEC+ commitment to increase supply by 400,000 b/d in each of the coming months should make the market looser than previously expected.”

“The recent increase in yields across the curve, a firmer USD along with less risk appetite post taper announcement could be another set of factors likely bringing crude lower for a time.”

“The sharp drop in US net exports suggests that international demand is still soft, which is supported by the fact that key agencies following crude oil markets are all downgrading their Q3 demand projections aggressively due to COVID-19, with possibly more to come. As such, a WTI move back to $65/b in the near-term would not be a big surprise.”

“Considering signs that China’s COVID-19 problems are moderating, likely improvements on the economic side in the rest of the world in the coming months along with the fact that OPEC+ will continue to adjust supply to demand, the longer-term looks more promising and WTI could well move into the $70+ territory.”