The January WTI (CLF25) trading session settled at 68.94 (-2.30) [-3.23%], a high of 71.44, a low of 68.74. Cash price is at 71.23 (+1.14), while open interest for CLF25 is at 346,924. CLF25 settled below its 5 day (69.68), below its 20 day (69.30), below its 50 day (69.90), below its 100 day (71.31), below its 200 day (73.58) and below its year-to-date (73.28) moving averages. The COT report (Futures and Options Summary) as of 11/19 showed commercials with a net short position of -228,299 (a increase in long positions by +7,119 from the previous week) and non-commercials who are net long +219,154 (a increase in long positions by +7,454 from the previous week).
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After crude oil prices saw a roughly +6% gain last week on the heels of the Russia-Ukraine war, oil prices have headed lower today after sources told Axios a emerging ceasefire deal between Hezbollah and Israel was in the works, that supposedly has Prime Minister Netanyahu’s approval. Netanyahu’s spokesperson told CNN that the Israeli cabinet will vote on the proposed ceasefire deal tomorrow. The deal aims to first implement a 60-day ceasefire, where the Israeli military would withdraw from southern Lebanon and Hezbollah would move weapons north while UN peacekeepers would secure the border with the Lebanese army. This news comes after a weekend where Hezbollah fired 340 rockets and drones at Israel (with 250 of those being launched on Sunday), according to Israel’s military, who also said the IDF had carried out strikes on 12 Hezbollah command centers in southern Beirut on Sunday. We shall see what happens, but personally I am skeptical that a ceasefire will be agreed upon this week with the pot shots we saw this weekend fired by both sides and Iran’s involvement in the fiasco.
Reuters put out an exclusive story this morning stating Trump’s transition team is putting together a large and sweeping energy package that Trump’s team plans to implement within days after his induction. According to Reuters the two sources say the plan would approve export permits for LNG and increase oil drilling on federal lands and the U.S. coast, as well as officially approve the Keystone Pipeline. According to federal data, oil production on federal lands and the U.S. coast hit all-time highs in 2023, with drilling on federal lands and waters accounting for about a quarter of U.S. oil production. The response to Trump’s nomination for Treasury Secretary, Scott Bessent, has seemed to be overwhelmingly positive from what I have read and seen from the market reaction today and over the weekend. Described as a fiscal hawk and moderate when it comes to global trade, he is expected to take a “softer approach” when it comes to Trump’s proposed tariffs and regulation cut backs. The U.S. Dollar Index closed lower by -0.60% and the major stock indexes closed higher.
China has issued an additional crude oil import quota of at least 116,800 barrels per day to independent refiners for cargoes arriving in December 2024 and early 2025, Reuters reported Sunday night. China’s current crude oil import quota for non state-owned firms crude oil in 2024 is 243 million tons, in 2025 it will be raised to 257 million tons. Last month China imported 10.53 million barrels per day of crude oil, which was 9% lower than October 2023 and 2% lower than the 11.07 million barrels per day imported in September of this year, according to China’s General Administration of Customs. China’s Shanghai Stock Exchange Index, the CSI 300 closed -0.46% lower today.
There are whispers going around the trade desks that OPEC+ will again delay their planned output increase by another month at the group’s upcoming meeting this Sunday. The latest story on the topic comes from Reuters, with Azerbaijan’s Energy Minister Shabazov this morning giving credence to the rumor and after Reuters late last week put out a similar story citing two sources who declined to be named.
Weather forecasts for this week predict winter temperatures across the Upper Midwest and East-Coast here in the states. Travel Group AAA predicts up to 80 million Americans will be traveling for the Thanksgiving holiday this week, the 80 million figure is a 1.3 million increase compared to last year.
Tomorrow The American Petroleum Institute releases its weekly report on U.S. oil inventories.
Price Thoughts – Historically the Thanksgiving holiday is a low volume, high volatility week for the energy markets. Personally I would be looking to buy any price breaks under $66 at the moment. Settling below $67 this week could see a further price break towards the next support line around $65 flat, which has been a major support line over the last few years, and today’s Hezbollah-Israel ceasefire deal could push us there if a deal is signed. To the upside ~$70.25 is still the short term resistance with mid ~$72 (which were tested last week and this morning) after that. In the short term I would expect higher volatility with the current geopolitical tensions, but there’s still a weight on prices via the demand situation.
Now that Donald Trump has been elected President, I believe he’ll fulfill his promise to “Drill baby, drill”, significantly increasing the output capacity for American energy, passing executive orders as soon as day one in office. Keep in mind that the U.S. currently produces 13.5 million barrels of oil per day, a figure that’s nearly 30% higher than it was just four years ago. Over the past 50 years, U.S. energy production has grown at a faster rate than consumption, and since 2019, America has been a net energy exporter. We shall see where that “million barrels per day” number goes after Trump is sworn in. Drastically increasing American energy output could create an interesting market share conflict with the OPEC+ nations, but that’s another story, potentially down the line. 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, and we’ll have to wait and see the impact Trump’s tariffs have. And then there’s the Middle East situation, which could simmer or explode, and even if the violence ends I believe we’ll see new economic sanctions on Iran. 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 $65 to middle $70’s range, for long as there’s no black swan events.
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