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Title : Weekly Crude Oil -- July 12, 2017
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Weekly Crude Oil -- July 12, 2017

Drop in US crude oil inventories: Reuters: oil rises above $48 as API reports drop in US fuel stocks. If this number holds up, it's very, very bullish ... and quite surprising. The API reported yesterday that US crude oil inventories fell by 8.1 million barrels.

EIA has also lowered its forecast for the amount of US oil production forecast for next year. Previously, the EIA suggested that US oil production would hit 10 million bopd -- an all-time record sometime next year (I thought there were even suggestions that the10-million threshold would be hit by the end of the year). Now, the EIA suggests US crude oil production will "only" reach 9.9 million bopd next year.

And then, of course there are all those reports of "stealth" demand no one is noting.

Goldman Sachs, recently admitting that it had really been burned on its crude oil prognostications, now warns that crude oil could drop below $40.

Citi says there could be some short term pressure on crude oil but by the end of 2017, WTI could approach $60.

My wishy-washy reading of the tea leaves: the fundamentals suggest that WTI cannot get to $60 by the end of the year, but oil trading is as much "emotional" as "rational." Thus, if we have several weeks of crude oil inventory declines greater than expected, the price of oil could rise significantly. The problem for Saudi: the smaller operators in the Permian are starting to show significant stress: they spent a lot to enter the Permian and will have to spend even more to develop it. They will take every increase in the price of oil as an opportunity to increase Permian production. For the Permian, it looks like the "magic number" for many operators is $50.

And so it goes.

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