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Schachter Eye on Energy: Crude oil retreats on inventory build and Saudi announcements of production recovery

1024x256_goldblue Schachter Eye on Energy

Each week Josef Schachter will give you his insights into global events, price forecasts and the fundamentals of the energy sector. Josef offers a twice monthly Black Gold newsletter covering the general energy market and 34 energy and energy service companies with regular updates. He holds quarterly subscriber webinars and provides Action BUY and SELL Alerts for paid subscribers. Learn more and subscribe.

EIA DATA: Crude oil prices have reversed the big lift of last week due to the Iran attack against the Saudi oil facilities at Abqaiq. From US$54/b on September 12th, the price rocketed higher, rising nearly US$10/b on Monday September 16 to US$63.38/b, as the news of the size and scope of the attack was disconcerting  to investors. Since then, Saudi announcements about their ability to meet export demand and to repair the facilities quickly have lowered the risk premium. Prices on Friday Sept 27th were US$55.65/b. The EIA report of Wednesday September 25th was bearish as commercial inventories rose 2.4Mb on the week versus the expectation of a decline of 0.5Mb. We have been expecting rises like this to occur as we are now in the slower shoulder season when inventories should rise. What is of even more bearish concern is that net imports fell 480Kb/d or 3.4Mb on the week. Had net imports been flat with the prior week, inventories would have lifted by 5.8Mb. This would have really shafted crude prices. US production rose as the new Permian pipelines are bringing on new production. US volumes rose 100Kb/d to 12.5Mb/d. We expect to see US production rise to over 13.0Mb/d before year end. 

CONCLUSION: We expect over the coming weeks, as more inventory builds occur, that the price of WTI will fall further to the low US$50 range. Our previous view of sub-US$50/b is now unlikely due to the risk premium on OPEC crude volumes from the Middle East. Iran has now shown that they have the ability to disrupt crude supplies with their sophisticated armed drones and cruise missiles. The risk premium for crude oil should stay high given that Iran has proven they have the capability of attacking any OPEC competitor in the area. Hold off buying for now as we expect the TSX Energy Index to fall below 125 in the coming months (now 138). 

CONFERENCE: Our ‘Catch the Energy’ Conference is filling up quickly. General admission tickets are now sold out. We still have some VIP tickets which include the lunch with company executives. Due to demand we have added one more ticket group ‘Basic Breakout Tickets’ which allows attendees to attend the company presentations and includes lunch. It does not include breakfast, my plenary welcome session or the Indigenous Panel. The cost of these tickets are $69 each.



The 2nd Annual Schachter Catch the Energy Conference will be held at Mount Royal University in Calgary on Saturday, October 19th. This is a rare opportunity for investors to learn more and interact with 26 Energy Sector CEOs. Below are the 26 companies presenting at the conference.

Schachter Energy Conference 2019 Exhibitors

Register early as a VIP to have lunch with your preferred CEO or company. Learn more and register.

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