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WTI closed higher for the first time in five sessions yesterday

The front month West Texas Intermediate contract is up $1.25 from yesterday’s close of $47.98 per barrel. The 2.3% increase in WTI front month contracts marked the first time in five sessions that the price of the U.S. crude benchmark finished the day strong than when it started.

The Department of Energy (DOE) reported crude inventories of 459,682 MBOE, a decline of 4,203 MBOE from last week. Crude oil inventories were climbing after eight weeks of declines, putting more pressure on WTI prices. Cushing inventories decreased by 212 MBOE from last week, while distillate inventories increased by 2,588 MBOE in the same time period.

U.S. stocks also saw the end to a five-day losing streak Tuesday, with the S&P 500 gaining 1.2%, while the blue-chip Dow and Nasdaq Composite closed up 1.1% and 1%, respectively. WTI closed today up again at $48.82, continuing yesterday’s gains.

International benchmark fairing worse

While WTI saw its first gains in several days, Brent crude oil continued to feel downward pressure from international events. Concerns over further declines in the Chinese stock market and more crude oil coming out of Iran continue to weigh heavy on the international crude oil benchmark.

China’s stock market saw a rebound today, with the country taking the lead in a broader recovery in Asian markets, reports CNBC. The Shanghai Composite index gained 3.5% Wednesday, breaking a three-day losing streak. China’s blue-chip stocks showed mix results even as the broader index gained, however. PetroChina (ticker: PTR) closed down 1.7%, while Bank of China shed 0.6% and China Vanke lost 0.1%. China’s Poly Real Estate gained 3%.

Analyst Commentary

Pavel Molchanov, Raymond James 07.29.2015
Oil prices have been relentlessly choppy year-to-date: setting six-year lows in January, bouncing in February, retracing some of those gains in March, gaining again in April, trading within a narrow range during May and most of June, and falling sharply throughout July amid the intensified fears about Greece/Eurozone, China, and Iran. Alongside the mixed macroeconomic headlines, including the choppiness in the U.S. dollar, several wildcards remain in play, such as: 1) on the bullish side, the possibility of supply disruptions above and beyond the outages in Libya and 2) on the bearish side, the prospect of an eventual (post-sanctions) recovery of exports from Iran. Bearing all that in mind, our current 2015 forecasts for Brent and WTI are $62/Bbl and $55/Bbl, respectively. Our 2016 and long-term forecasts for Brent/WTI are $72/$65 and $77/$70, respectively. The 12-month futures strip is currently at $56.21/Bbl for Brent and $50.67/Bbl for WTI.

Roger Read, Wells Fargo 07.29.2015
Total net inventories increased by 2.7 million barrels of oil equivalent (MMboe) versus the prior week, which included a 6.9 MMboe build in product stocks partially offset by a 4.2 MMboe draw in crude. Product builds across most categories were partially offset by slight draws in motor gasoline (mogas), jet, and other oils. The crude draw was mostly concentrated in the Gulf Coast and West Coast with build in the East Coast and Midwest as a slight offset. Estimated crude production declined by 145 thousand barrels per day (Mbpd), with Lower 48 production decreasing by 151 Mbpd. Refinery utilization fell by 40bps to 95.1%-- inputs were down but total products supplied increased. Mogas, distillate and crude imports were all lower as compared to the previous week. The front month WTI contract is up $1.25/bbl (2.6%) versus yesterday’s close of $47.98/bbl.  

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