Oils prices moved lower overnight with WTI by far the worst performer, falling 1.60% in New York trading despite Hurricane Harvey bearing down on the Texas coast, promising extensive disruption to both refining and extraction operations. The answer may well lie with gasoline futures, which moved the opposite way and rose 2 percent on the day. We suspect that a stronger U.S. dollar overnight and position squaring ahead of Janet Yellen’s keynote speech at Jackson Hole were the underlying drivers as Brent also fell, but only by 0.70%.
If Hurricane Harvey’s potential to cause disruption and damage in Texas is what the experts are predicting, we expect that the sell-off in WTI may only be transitory. Damage and flooding to refineries and shale fields, disrupted production in the Gulf of Mexico and infrastructure damage are unlikely to be bearish for WTI.
WTI spot trades at 47.60 this morning, at its 100-day moving average. Overnight it broke its trend line support of the last week with this line now resistance just above at 47.80. Overnight support lies at 46.90 followed by 46.45. The picture is not positive from a technical perspective, however given the event risks mentioned we will take it with a grain of salt for now.
Brent spot continue to trade at a strong premium to WTI, moving slightly higher from its close to 52.40 this morning. It tested but closed above its 200-day average at 51.85 and support remains untested at 51.20. Resistance at 52.70 continues to be the centre of attention. Otherwise the contract seems content to range trade at the upper end of its monthly range into the weekend.