Last month I was concerned about Brexit and its implications for the oil market. At present, Brexit doesn’t seem to be playing an important role in the markets.
Oil recently has softened as there is a glut of refined products. With too much inventory, refineries are likely to cut back on their crude purchases. Making matters worse, according to Reuters, “OPEC oil output set to reach record high in July: survey.” Furthermore, as we enter into August, refinery utilization rates typically begin to slow as we approach the shoulder season between summer driving and winter heating. The U.S. Energy Information Administration provides a graph showing last year’s and this year’s “Crude oil refinery inputs.” Looking at the graph, we see that crude oil inputs begin to slow sometime in early August and reach their low points in late October or early November.
Now that oil prices have softened to the low $40s, we are left wondering will prices continue to fall or stabilize before heading higher again?