WTI Oil Prices Expected to Fall Below $50/B as Trade War Escalates

The recent decline in commercial crude stocks has led to a temporary lift in WTI oil prices. However, according to Josef Schachter, this bounce is not justified as the data was neutral to bearish for the most part. The Energy Information Administration (EIA) reported that US production rose by 200Kb/d to 12.5Mb, a new all-time high, due to the opening of new Permian pipelines and shut-in production coming back online.

Net imports fell by 1.5Mb/d or 10.5Mb on the week with imports declining 1.29Mb/d and exports rising 216Kb/d. Demand for all products rose to 22.2Mb/d, with gasoline demand reaching a summer high of 9.9Mb/d.

Schachter believes that once the fall seasonal build starts, crude prices will falter and decline below US$50/b, which is currently at US$55/b. The S&P/TSX Energy index is expected to drop another 10% or so to the 110 or lower level by late October.

The trade war between the US and China is also expected to escalate in September, further depressing stock markets. Schachter warns that it will get very nasty in the coming weeks.