The Nov WTI (CLX24) trading session settled at 73.83 (-1.73) [-2.29%], had a high of 75.08, a low of 71.81. Cash price is at 75.51 (-0.33), while open interest for CLX24 is at 197,403. CLX settled below its 5 day (74.42) ((broke through its 5 day to the downside)), above its 20 day (71.74), above its 50 day (71.84), and below its 200 day (74.93) moving-averages. CLX is down 2.29% 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.
Oil began declining Sunday night as China’s Finance Minister Zheng Shanjie on Saturday did not disclose any new incentives that would increase their oil consumption. Although he did leave the door open for more stimulus,by not announcing any specific new measures during that briefing it was not what bullish oil traders were hoping for. OPEC for the third consecutive month cut its global oil demand growth figure for 2024, and lowered its forecast for 2025 as well. OPEC’s oil production was lower for the month of September, down to 604,00b\d, mainly driven by the production standstill in Libya (which is back to pre-standoff production levels again) and lower output from Iraq (who had previously been reprimanded by other OPEC nations for going over their output quota). OPEC’s economic growth forecast for China remained unchanged, however China’s oil demand for next year was lowered from 650,000b\d to 580,000b\d. 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 1.19% today.
Again the pull back happening in crude coincided with the ongoing “wait and see” moment we’re in with Israel before their military makes its next move. I still believe it’s more of a matter of when than if. U.S. officials over the weekend said they believed Israel had narrowed down their targets in Iran to military and energy sites. I think the war-premium has been priced out, as of today, but I think it did reduce funds in their short positioning that had been so heavily in place beforehand, to manage the potential risk. But just as that premium has been priced out it could just as fast be priced back in as soon as a strike by Israel commences. Last Friday The U.S. Treasury Department announced it was bringing back an executive order from 2020 which targets companies colluding with Iran’s energy sector and banning Americans from doing business with these companies. Treasury Secretary Janet L. Yellen said, “In response to Iran’s attack on Israel, the United States is taking decisive action to further disrupt the Iranian regime’s ability to fund and carry out its destabilizing activity”.
Last week’s EIA report showed crude inventories increasing by 5.8 million barrels, which came in higher than the 2 million barrels forecast, with Imports at 6.2 million b\d and Exports at 3.79 million b\d and with Refineries operating at 86.7% capacity. The EIA 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 b\d lower than the previous forecast. The API report from last Tuesday showed crude stockpiles increasing by 11 million barrels and a 2.359 million barrel increase at Cushing.
Short-term technicals I see support levels around $71.50-72.50 and resistance around $77-$78 and the market being volatile. Until there’s a missile strike on Iranian energy sites I believe there’s downward pressure facing crude prices, which I think could push us back into that high $60’s low $70’s range extending into next year. 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.
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Jim Rinaudo
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