The December WTI (CLZ24) trading session settled at 70.77 (-0.97) [-1.35%], had a high of 71.72, a low of 70.13. Cash price is at 71.73 (+1.17), while open interest for CLZ24 is at 338,032. CLZ settled above its 5 day (70.31), below its 20 day (71.26), above its 50 day (70.74), below its 100 day (73.39) and below its 200 day (74.34) moving-averages. The COT report (Futures and Options Summary) as of 10/15 showed commercials with a net short position of -246,812 (a decrease in short positions by +6,041 compared to last week) to non-commercials who are net long 213,220 (a decrease in long positions by -12,994 compared to last week).
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The Energy Information Administration (EIA) weekly report from this morning showed crude inventories rising by 5.5 million barrels, bringing a total inventory count to 426 million barrels, this was higher than analysts from Reuters forecast of a +270,000 barrel build. U.S. oil production was assessed to be at 13.5 million barrels per day. American imports averaged 6.4 million barrels per day, increasing by 902,000b/d. The American Petroleum Institute (API) data from yesterday showed U.S. crude stocks building by 1.64 million barrels last week, above the Reuters forecast of +300,000 barrels. The Department of Energy reported a 5.47 million barrel increase, over a +800,000 forecast. The Cushing hub saw a draw of -346,000 barrels. U.S. crude refinery was up 329,000p/d over the previous week, averaging 16.1 million barrels per day. U.S. inventories remain ~4% lower than the five year seasonal average.
Yesterday the investment bank Goldman Sachs updated their price forecast for crude oil next year, stating “Overall, we still see the medium-term risks to our $70-85/bbl range as two-sided but skewed moderately to the downside on net as downside price risks from high spare capacity and potentially broader trade tariffs outweigh upside price”. Expecting an average price of around $76 per barrel. “Despite large global spare capacity and so far undisrupted Iran oil production, we don’t think that a 2025 supply glut is a done deal”
China’s Commerce Ministry announced yesterday that starting in 2025 China would raise its crude oil import quota for private importers by 6%, which is roughly 5.14 million barrels per day. Bull’s were happy to see China lowering their prime lending rates on Monday, providing a fresh batch of monetary stimulus for the country. At the Singapore International Energy Week Saudi Aramco’’s CEO Amin Nasser was quoted as saying he remains “fairly bullish” on China’s oil imports. The Shanghai CSI 300 Index rose 0.39% today.
U.S. Secretary of State Antony Blinken arrived in Israel yesterday to revive discussions aimed at ending the Gaza war and the escalating conflict in Lebanon. Over the weekend classified documents leaked from U.S. officials detailing information pertaining to Israel’s retaliatory strike on Iran. According to U.S. officials that have been briefed, Israel is poised to strike Iran before the U.S. Presidential election, which is now less than two weeks away. American government officials have stated that Israel does not intend to attack Iranian energy infrastructure or nuclear sites. On Tuesday night the newest leader of Hezbollah Hashem Safieddine was confirmed to have been killed in Israeli airstrikes.
Bloomberg reported that Russia’s crude oil exports have reached a four-month high, according to tanker tracking data. Exports to Asia have climbed to a five-month high. However, Russian crude refiners are operating at their lowest levels since May 2022, based on Bloomberg’s estimates. The yearly three-day meeting of BRICS nations began yesterday, with China’s Xi, India’s Modi, Turkey’s Erdogan and Iran’s Pezeshkian joining President Putin in Russia. The focus of the summit will be on how to grow the economic partnership between the BRICS alliance and counterbalance the influence of the United States, the European Union and other “western” aligned nations.
In its World Economic Outlook report released yesterday the International Monetary Fund projected global output will grow by 3.2%, a small downgrade of 0.1% from its July estimate. The projection for this year remains unchanged at 3.2%. The IMF also anticipates that global inflation will decrease to 4.3% next year, down from 5.8% in 2024, describing this outlook as “stable yet underwhelming.”
Price Thoughts – The $67 floor has seemed to hold and I think prices will try to test $72 to the upside (December contracts sold off after hitting yesterday’s high of just over $72) , with the next technical resistance around $75.50, I believe. I expect us to stay in this range for the time being. In my short-term view, with this Israeli strike looming over the markets, I would expect the market to move ~5% higher off the back of that attack alone, and we could see a push up towards $77-$80. After which I would expect we then sell back to the range (mid $60’s – low $70’s) we’re in now. Of course we could go much, much higher, if a blockade of the Strait of Hormuz takes place or if the Mideast conflict begins to spiral out of control. But with the prevailing themes of a stronger dollar, potential trade wars, increasing supply, slowing economies and a lack of global demand front running price sentiment, I do not foresee 2025 crude oil prices averaging in the $85-$95 range.
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Jim Rinaudo
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