WTI Crude Oil Outlook: Oil Slumps as FTC Plans to Investigate Gas Stations

Aug 31, 2021 01:39 PM ET
WTI Crude Oil Outlook: Oil Slumps as FTC Plans to Investigate Gas Stations
  • The US Federal Trade Commission (FTC) is set to investigate the legality of mergers in the oil & gas industry on possible price fixing. 
  •  Global oil companies have stepped up their efforts to acquire top Indian refiner- Bharat Petroleum Corporation Ltd (BPCL).
  • Gasoline prices declined 1.11% to trade at $2.287 per barrel as of 5:39 am on August 31, 2021.

WTI Crude oil prices slumped to a -1.18% decline as of 4:23 am on August 31, 2021 from the previous day’s close. It traded to a low of $68.39 per barrel following reports of investigations by the US Federal Trade Commission (FTC) on legality of mergers in the oil and gas industry.

The report comes a day after market speculation on the impact of Hurricane Ida on the Gulf of Mexico, drove up prices to a +2% price change in the week ending on August 27, 2021.

In Louisiana where the hurricane hit hard, the Louisiana Light (sweet crude oil) added 2.99% as of 5:34 am on August 31, 2021 trading at $70.29 per barrel. 

Investigations

The FTC is investigating whether there is an artificial price increase as a result of mergers in the oil and gas sector. Franchises among gas stations are also under investigations in regards to price manipulations of retail gasoline.

Gasoline prices declined 1.11% to trade at $2.287 per barrel as of 5:39 am on August 31, 2021.

The Chairperson of the FTC, Lina Khan targets gas stations that make illegal deals meant to disadvantage other gas facilities through price collusion. In the FTC’s radar are national oil and gas chains that purchase family-owned oil businesses in the US.

Expected production increase

Global oil companies have stepped up their efforts to acquire top Indian refiner - Bharat Petroleum Corporation Ltd (BPCL). In 2020, the government’s 52.98% stake was scheduled for a buyout by India's Vedanta group.

US (Investment) funds involved in the race include: Apollo Global and I-Squared Capital.  Bharat (BPCL) also doubles up as the second-biggest fuel retailing company in India. Its refining capacity totals 35.30 million tons (spread across 3 regions in India) with 18,768 pumps and 6,169 distributors of LPG.

New discovery in China

Sinopec, China’s state oil agency announced a discovery of 100 million tons of oil in Xinjiang. The company drilled a daily amount of 865 tons of crude oil representing 6.315 barrels. It also drilled natural gas amounting to 590,000 cubic meters.

Sinopec’s exploration in Xinjiang from 2016 to 2020 jumped 30% to 1 million tons. On its part, production of gas soared 32% to 350 million cubic meters.

Natural gas prices gained 0.16% to trade at $4.316 barrels per day as of 6:15 am GMT on August 31, 2021.

Technical analysis

WTI crude oil found support at 61.555 with the descending wedge indicating price decline from 72.505 to 68.480. It appears to seek further correction towards 62.744.

WTI Crude Oil Daily Price Chart

In the chart below, the descending trendline is seen to allow further correction towards the support zone at 57.069. However, at 68.480, crude oil is moving above the 9-day EMA at 66.870. Continual uptrend will see the commodity lift towards 72.505.

WTI Crude Oil Daily Price Chart

The 14-day RSI increased above the neutral zone at 49.93 indicating an increase in buying momentum. There is also an increase in volatility with the 14-day ATR at 2.766.


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