$60s: ANS rangebound

Potentially pivotal possibilities, but no catalyst for big price move

Steve Sutherlin

Petroleum News

Alaska North Slope crude spent a second consecutive trading week rangebound in the upper $60s despite a series of discussions for peace in the Russia/Ukraine conflict, with potential outcomes that could lead to significant shifts in oil markets.

ANS fell 62 cents Aug. 19 to close at $67.84 per barrel, just 45 cents below its close of $68.28 on Aug. 12. West Texas Intermediate fell $1.07 on the day to close at $62.35 and Brent fell 81 cents to close at $65.79.

Initial progress has been made in the Russia/Ukraine talks; the key variables now are in for a period of uncertainty with cloudy timeframes. A lasting peace agreement will entail balancing a plethora of concerns for the combatants, as well as for the United States and The European Union.

The forces of bulls and bears seem to be in stasis, with too many factors tugging sentiment in too many directions. No high-confidence trends have emerged.

"Not so sure about the peace deal -- will have to see if something moves forward over the coming days ... It seems oil prices are thrown down one day, followed by a rebound the next," said Giovanni Staunovo, a UBS analyst quoted in an Aug. 20 Reuters report.

Traders seem to have sucked in their collective breath, waiting to exhale.

The upcoming symposium at Jackson Hole Aug. 22 may be the catalyst the crude oil market is waiting for.

The Jackson Hole event is focused on a singular scheduled event -- a speech presented by the U.S. Federal Reserve Chairman Jerome Powell -- with the potential to move the needle on liquidity in U.S. financial markets, impacting demand for crude.

Crude futures up on surprise inventory draw

"Gains could be limited as the geopolitical outlook remains uncertain," Felipe Barrag'n of Pepperstone said in a note, the Wall Street Journal reported Aug. 20. "The potential easing of sanctions on Russian crude continues to hang over market sentiment, while rising OPEC+ output also fuels downside risks."

U.S. commercial crude oil inventories for the week ended Aug. 15 plummeted by 6 million barrels from the previous week to 420.7 million barrels -- 6% below the five-year average for the time of year, according to U.S. Energy information Administration data released Aug. 20.

Analysts answering a Wall Street Journal poll had on average estimated a drawdown of 1.5 million barrels. A Reuters poll predicted a fall of 1.8 million barrels.

Total motor gasoline inventories fell by 2.7 million barrels over the week to 223.6 million barrels -- 1% below the five-year average for the season, the EIA said. Distillate fuel inventories rose by 2.3 million barrels to 116.0 million barrels -- 13% below the five-year average for the time of year.

The Wall Street Journal poll had called for gasoline inventories to fall by 1.3 million barrels, while stocks of distillate fuels were expected to rise by 700,000 barrels.

ANS gained 66 cents Aug. 18 to close at $68.62, while WTI gained 62 cents to close at $63.42 and Brent gained 75 cents to close at $66.60.

Ukraine President Volodymyr Zelenskiy met Aug. 18 at the White House with U.S. President Donald Trump for peace talks in the wake of Aug. 15 talks between Trump and Russian President Vladimir Putin in Alaska.

European leaders were also in Washington Aug. 18.

Price action was negative Aug. 15. ANS fell 79 cents to close at $67.96, WTI dropped $1.16 to close at $62.80 and Brent dropped 99 cents to close at $65.85.

ANS added 88 cents Aug. 14 to close at $68.76, as WTI leapt $1.31 to close at $63.96 and Brent leapt $1.21 to close at $66.84.

On Aug. 13, ANS fell 41 cents to close at $67.87, WTI fell 52 cents to close at $$62.65 and Brent fell 49 cents to close at $65.63.

On Aug. 19 ANS held a $5.49 premium over WTI and a $2.05 premium over Brent.

Oil futures extended gains in Asian trade early Aug. 21 as Petroleum News went to press. WTI and Brent were up 52 cents and 51 cents respectively.