Fall Seasonality Apparent In Crude Oil

Posted Wednesday, October 9, 2019 by
Shain Vernier • 2 min read

Defined by growing supplies and reduced demand for refined fuels, fall seasonality is taking hold of the global oil market. Earlier today, the EIA Crude Oil Stocks report showed yet another supply build, reinforcing Tuesday’s robust API figure. Of course, November WTI futures are ignoring the data. At press time (12:45 PM EST), WTI is up more than $0.75 per barrel and back above $53.00.

November WTI Crude Oil Futures (CL), Daily Chart
November WTI Crude Oil Futures (CL), Daily Chart

Although WTI is on the march north today, an overall bearish bias toward global oil continues to be warranted. Price is still well below the 38% Fibonacci Retracement ($54.24); until this level is taken out, the downside potential of WTI is best respected.

Fall Seasonality Affecting Crude Oil Supplies

When talking about commodities, the term “seasonality” refers to seasonal trends in supply, demand, and pricing. For crude oil, it means that prices increase during the summer months in the Northern Hemisphere and decrease during the winter. The fall season acts as a buffer between the two, featuring growing supply and lagging demand. Subsequently, WTI pricing exhibits bearish price action in comparison to that of the summer months.

This week’s inventory cycle has come and gone, bringing little surprise to energy market professionals. Here is a quick look at the data:

Event                                             Actual      Projected    Previous

API Crude Oil Stocks                   4.13M           NA              -5.92M

EIA Crude Oil Stocks                   2.927M      1.413M         3.100M

Both the API and EIA numbers came in exceedingly positive this week. However, Tuesday’s API report is a real eyebrow-raiser, showing a +10 million barrel swing in supply. 

Overview: Barring any disruptions to the global supply chain, WTI crude is in a position to move lower as the year progresses. A global economic slowdown and typical fall/winter seasonality are the primary reasons why. Even though anything is possible on the global oil markets, it is short-or-nothing until proven otherwise.

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