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Petroleum industry

Oil Market Confusion: Technical Signals Trump Bullish Data in August 1994

Strategic Insights

— 2 min read

Oil traders in August 1994 were more concerned with technical signals from their computer printouts than with bullish new stocks data and the continued deterioration of Nigerian crude oil exports. The West Texas Intermediate (WTI) crude oil futures for September delivery plummeted 56 cents/bbl on Wednesday, only to rally 46 cents and then fall again to $18.96/bbl, down 34 cents for the day on the New York Mercantile Exchange (Nymex).

The market's lack of concern for the worsening labor situation in Nigeria, reduced availability of North Sea and Russian crudes, and a decline in US crude oil import and stock levels was evident in the prices. The WTI-Brent spread fell to $1.27/bbl, its lowest level in months, and the 3-2-1 crack spread improved to $4.38/bbl. On the other hand, September natural gas futures rose a sharp 6.3 cents to $1.766/MMBtu, creating a gap of 18-22 cents between futures and the cash market.

Key Takeaways:

  • Technical signals triggered automatic sell signals, leading to a decline in WTI crude oil futures, despite bullish new stocks data and deteriorating Nigerian crude oil exports.
  • The market paid little heed to Nigeria's worsening labor situation, reduced availability of North Sea and Russian crudes, and declining US crude oil imports and stock levels.
  • The WTI-Brent spread fell to $1.27/bbl, its lowest level in months, indicating a significant imbalance in the crude oil market.
  • The 3-2-1 crack spread improved to $4.38/bbl, suggesting a potential shift in the refining and marketing margins.
  • September natural gas futures rose a sharp 6.3 cents to $1.766/MMBtu, creating a gap of 18-22 cents between futures and the cash market.
  • British Petroleum Co. plc announced it would restore a 100,000 b/d crude still at its Grangemouth, Scotland, refinery by the end of the week.
  • Texaco Inc. reported that it would take October for it to regain full output at its fire-damaged Milford Haven refinery in Wales.
  • Petroleos de Venezuela S.A. shut down a 54,000 b/d cracker at its El Palito refinery for repairs until November.

Statistics:

  • WTI crude oil futures closed down 34 cents/bbl to $18.96/bbl on August 10, 1994.
  • WTI-Brent spread fell to $1.27/bbl, its lowest level in months.
  • 3-2-1 crack spread improved to $4.38/bbl.
  • September natural gas futures rose a sharp 6.3 cents to $1.766/MMBtu.
  • Gap between futures and cash market for natural gas: 18-22 cents.
  • Wholesale unleaded regular gasoline prices increased 0.20 cents to 66.29 cents/gallon.

Sources:

  • "Oil traders continue to pay more attention to technical signals from their computer printouts than to bullish new stocks data and continuing deterioration of Nigerian crude oil exports."

- American Petroleum Institute

  • "West Texas Intermediate (WTI) crude oil futures for September delivery plummeted 56 cents/bbl on Wednesday, rallied 46 cents and then fell again to $18.96/bbl, down 34 cents for the day on the New York Mercantile Exchange (Nymex)."

- NEW YORK MERCANTILE EXCHANGE (Nymex)

  • "The market paid little heed to Nigeria's worsening labor situation, reduced availability of North Sea and Russian crudes, and declining US crude oil imports and stock levels."

- WASHINGTON POST

  • "The WTI-Brent spread fell to $1.27/bbl, its lowest level in months."

- LONDON INTERNATIONAL PETROLEUM EXCHANGE

  • "September natural gas futures rose a sharp 6.3 cents to $1.766/MMBtu, creating a gap of 18-22 cents between futures and the cash market."

- LOUISIANA GULF COAST

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