Analysts at TD Securities warn that the robust crude inventory draw recently reported is not enough to keep the current rally alive in crude oil prices. Over the long term, they see a more promising outlook suggesting WTI could rise back above $70.
Key Quotes:
“For a second week in a row, crude posted a modest rally shortly after the EIA data showed a 2.98 million bbl inventory draw for the week to August 20. This is roughly equal to the 3.2 million bbl decline reported for the previous period and some million bbls more than what was expected by analyst consensus.”
“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, which is driven by stronger risk appetite and the full approval of the Pfizer COVID vaccine, going for much longer. Indeed, the crude market will very likely continue to face headwinds from the Delta variant as it will take time for full Pfizer Vaccine approval to increase vaccination rates and as technical barriers from chart followers inhibit the rally with WTI prices right on the 100dma.”
“Considering signs that China’s COVID 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 (which could mean an eventual reduction in promised supply increases), the longer-term looks more promising and WTI could well move into the $70+ territory. Firm cracks suggest that product pricing may still serve as an upside catalyst for crude in the coming months.”
