The December WTI (CLZ24) trading session settled at 68.61 (+1.40) [+2.08%], had a high of 69.17, a low of 67.28. Cash price is at 67.17 (-0.18), while open interest for CLZ24 is at 354,114. CLZ settled below its 5 day (69.10), below its 20 day (71.44), below its 50 day (70.28), below its100 day (73.21) and below its 200 day (74.30) moving-averages. The COT report (Futures and Options Summary) as of 10/22 showed commercials with a net short position of -229,875 (a decrease in short positions by +16,937 compared to last week) to non-commercials who are net long +203,990 (a decrease in long positions by -9,230 compared to last week).
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Reuters, citing unnamed sources, reported that OPEC+ could delay their plans to increase oil production by 180,000 barrels per day starting in December. OPEC+ is scheduled to have their next meeting on December 1st.
Today’s EIA weekly petroleum status report showed crude inventories having a draw of -515,000 barrels, against a +1.37m/b build forecast. U.S. crude imports averaged 6 million barrels per day last week, a decrease of -456,000 barrels over the prior week. U.S. crude refineries were operating at 89.1% capacity. U.S. crude oil inventories are roughly ~4% below their five year seasonal average. The Cushing hub saw a +681,000 barrel build. Tuesday’s API report showed a decline in crude stocks by 573,000 barrels. Yesterday the U.S. Energy Department announced plans for adding 3 million barrels to the Strategic Petroleum Reserve through May of next year. Today’s U.S. GDP number covering the July through September quarter came in at 2.8%, slightly weaker than the previous 3% that covered the April through June quarter.
Reuters reported yesterday that China is considering the issuance of roughly $1.4 trillion in extra debt over the next few years. The newest stimulus package in a recent line of stimulus packages aiming to revive their staggering economy. China’s parliament is set to hold a major policy meeting the first week of November, conveniently timed up with the U.S. election. Sources told Reuters they expect further stimulus packages to be added by China if Donald Trump is elected to President next week, citing trade-war and tariff concerns. The Shanghai CSI 300 Index closed 0.90% lower today.
Axios reported that Senior White House Officials will be traveling to Israel tomorrow and meeting with Prime Minister Netanyahu to help push for a ceasefire between Hezbollah and Israel. According to Reuters Israel is considering ending its conflict in Lebanon against Hezbollah with a 60-day suspension of military activity to facilitate a lasting peace deal. Crude prices cratered Monday over $4 after Israel’s attack on Iranian missile sites avoided crude and nuclear facilities, which was viewed as more restrained than many analysts and traders had anticipated. The limited strike has, for now, erased the war premium that had been factored into the market, dropping from its peak a few weeks ago and offsetting the roughly 4% gains in the oil benchmarks from last week. As a result, the market is returning to the lower demand, higher output conditions in place. Monday was the largest single day decline for WTI in two years.
Price Thoughts – Settling above that crucial support line of $67 today may cause some short-term price recovery, either way I would continue to expect volatility from now till the U.S. election results are settled. Looking at charts here, I now see the next support line around ~$65.20 below, our current $67 support line, (breaking that could push us to $60) and resistance around ~$72 (breaking that could push us to $77). For now OPEC+ is sticking with their planned output increases starting in December, which is quite consequential and I believe not fully priced into futures still. Add to that, if Donald Trump is elected to President next week I believe he’ll fulfill his promise to “Drill baby, drill”, significantly increasing the output capacity for American energy. That could create an interesting market share conflict with the OPEC+ nations, but that’s another story, potentially down the line. And then there’s China, how much stimulus they choose to add to bolster their economy could determine crude prices significantly in the short and long term, I believe.
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, it leads me to believe in 2025 crude oil prices will not end up averaging in the $85-$95 range, rather I see crude prices trading in the high $60’s to $75 range, for long as there’s no black swan events.
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Jim Rinaudo
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