The Nov WTI (CLX24) trading session settled at 75.85 (+2.61) [+3.56%], had a high of 76.24, a low of 73.26. Cash price is at 73.24 (-0.43), while open interest for CLX24 is at 197,403. CLX settled above its 5 day (74.76), above its 20 day (71.09), above its 50 day (71.78), and above its 200 day (74.91) moving-averages. CLX is up +2.55% over the last 5 sessions. The COT report (Futures and Options Summary) as of 10/4 showed commercials with a net short position of -215,898 (a increase in short positions by 6,662 compared to last week) to non-commercials who are net long 198,109 (a increase in long positions by 6,962 compared to last week). The Dec contract has larger open interest than the Nov contract.
The EIA released its weekly report yesterday showing that crude inventories increased by 5.8 million barrels, coming in much higher than the 2 million barrels forecast, with Imports at 6.2 million bpd and Exports at 3.79 million bpd. Refineries were operating at 86.7% capacity last week. The EIA has revised its estimates for global crude oil demand for next year, now projecting an increase of 1.2 million barrels per day to 104.3 million barrels per day. This is 300,000 barrels per day lower than the previous forecast. The API report from Tuesday showed crude stockpiles increasing by 11 million barrels and a 2.359 million barrel increase at Cushing. Today’s CPI data came in a little higher than its forecast, +0.2% month-over-month, with the year-over-year CPI up 2.4%, this marks the 52nd straight month core consumer prices have risen on a month-over-month basis. U.S. Jobless claims came in at 258,000 for last week, this is the highest figure since August 5th of last year. The Big Three U.S. Stock Indexes closed slightly lower after setting new all time highs for the S&P 500 and Dow yesterday. Hurricane Milton made landfall as a Category 3 last night on the western coast of Florida. Analysts from Jefferies estimate it could cause in the range of $50 to $175 billion dollars in damage. All oil platforms near the hurricane path have resumed operations. But I assume it will take some time for logistics to get to pre-hurricane smoothness.
President Biden and Prime Minister Netanyahu had a conversation yesterday to discuss Israel’s anticipated response. Details indicate that President Biden urged Israel to refrain from targeting Iran’s oil fields. Reuters reported today that Gulf states including Saudi Arabia, Qatar and the UAE have been lobbying Washington officials to try to de-escalate tensions between Iran and Israel. Israeli Defense Minister Yoav Gallant was quoted yesterday stating Israel’s retaliation would be “lethal” and “surprising”. Yoav Gallant delayed his meeting with U.S. Defense Secretary Lloyd Austin that was supposed to have taken place this week. I believe that if Israel chooses to go with strategic smaller-scale retaliation, I would expect at some point there soon after for OPEC and the U.S. to fill the gap on the production loss Iran may incur (For context Iran produces 4 million barrels per day, ~4% of global production according to the EIA). A blocaide of the Strait of Hormuz, in my opinion, would be much more bearish for crude oil than targeted strikes on energy facilities, as ~21 million barrels flow through per day according to the EIA, which accounts for ~21% of the global crude trade.
China is set to hold a press conference this Saturday addressing their fiscal policy. One of China’s top economic policy makers Zheng Shanjie held a meeting Tuesday, telling reporters he was “fully confident” of achieving economic targets for 2024, but did not go into specific detail on any new stimulus measures. In a recent economic update the World Bank revised China’s growth rate to 4.3% for next year, which is lower than the 4.8% projected growth rate for this current year. The CSI 300 Index was up 1% today.
Short-term technicals I see support levels around $72 and resistance around $77-$78. Until there’s a missile strike on Iranian energy sites I believe there’s still downward pressure facing crude prices, which I think could push us back into that high $60’s low $70’s range. This of course could go completely the opposite way depending on the size and scale of Israel’s retaliation on Iran, or if there becomes a blockade of the Strait of Hormuz. But more than anything I believe the largest thing weighing the crude markets down is lower global demand and the cooling of economies worldwide, which could be why we’re seeing near record high commercial short positioning.
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Jim Rinaudo
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