Daily Oil Prices - WTI Oil Price Chart 12th August 2009

Whilst most markets remained relatively quiet yesterday ahead of today’s FOMC interest rate decision and statement daily oil prices reacted to a number of bearish fundamentals which saw WTI prices fall $1.15 to $69.45 and the ICE September Brent price fall by $1.04 to $72.46 a barrel.   These included some  cautious comments from OPEC which warned that current prices could only be sustained on “clearer signs of improvement in the global economy”.  In addition OPEC stressed the high level of oil inventories in the developed world as well as the weakness in US gasoline demand this summer and rounded off their comments by stating “Despite the recent positive developments in crude prices, the market is fundamentally weak”.  Furthermore, OPEC only expected Chinese oil demand to rise by 100k barrels a day this year to average 8.05m barrels per day in 2009.   At the same time the EIA also lowered its 2009 oil demand estimate when it stated in its new monthly energy forecast that it expects global oil consumption to drop by 1.71m barrels a day as opposed to the 1.56m it had signalled in its July report.  Some analysts had expected the EIA to increase the oil demand figures given the recent positive economic reports.  Today’s crude oil inventory figures and FED statement could therefore prove an interesting cocktail: analysts are forecasting the inventory to rise by 500k barrels and gasoline to decrease by 1.1m barrels.  Although distillates are expected to remain the same, despite falling for the first time last week since June, stocks still remain close to a 24yr high.  Refining capacity is also seen decreasing by 0.3% to 84.2%.  From a technical perspective yesterday’s oil price oscillated between the $71 and $69 price band, ending the session with a wide bodied doji candle with wicks to both top and bottom, although the lower wick did seem to find some support at the 14 day moving average.  Today’s FED meeting and, in particular, the accompanying statement will set the tone for crude oil prices in the short to medium term should there be a dramatic reaction in the currency markets.  Any signal from the FED that interest rates may rise sooner rather than later would be seen by the markets as dollar positive and prove bearish for crude oil prices.

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The short term is bearish, the medium term sideways and the long term bullish.