The February WTI (CLG25) trading session settled at 69.66 (-0.21) [-0.30%], a high of 70.27, a low of 68.74. Cash price is at 70.32 (+1.72), while open interest for CLG25 is at 262,100. CLG25 settled above its 5 day (68.60), above its 20 day (68.58), above its 50 day (69.56), below its 100 day (69.98), below its 200 day (72.87) and below its year-to-date (72.62) moving averages. The COT report (Futures and Options Summary) as of 12/3 showed commercials with a net short position of -237,552 (a increase in short positions by -3,881 from the previous week) and non-commercials who are net long +227,849 (a increase in long positions by +1,418 from the previous week).
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The International Energy Agency said in their monthly report that they predict world markets will have a glut of 1.4 million barrels a day, with OPEC+ extending their output cuts figured in, adding that even if OPEC+ delayed their output cuts for all of 2025 there would still be a glut of 950,000 barrels a day. They forecast global oil consumption will grow by 1.1 million barrels a day for 2025. They also foresee producers from outside OPEC+ expanding by 36%, citing increases from Brazil, the U.S. and Canada. The IEA predicts 2024 global demand will increase by 840,000 barrels a day and average 102.8 million barrels per day.
OPEC+ cut their oil demand growth forecast for this year and for next year for the fifth straight month. Via its latest monthly report, OPEC+ lowered their consumption growth 2024 figure by 210,000 barrels per day, foreseeing a total of 1.6 million barrels per day. Since July of this year OPEC+ has lowered their projections by 27%. Last week OPEC+, led by Saudi Arabia and Russia, agreed to delay their production undwinding until April 2025, which would last through September 2026, restoring 180,000 barrels per day until the currently withheld 2.2 million barrels per day are back online. The International Energy Agency predicts that even if OPEC+ continues to delay their production cuts through next year, that there will still be over a 1 million barrels per day surplus next year. Reuters sources said Saudi Arabia is expected to ship its largest amount of crude oil to China in over a three-month period upcoming in January, totalling 46 million barrels of crude oil, this is roughly 10 million more barrels than what will be shipped this December.
China’s crude oil imports grew in November for the first time in seven months, registering a +14% year-over-year increase Reuters reported, citing customs data. China’s average crude import rate registered at 11.81 million barrels per day, with the total monthly figure reaching 48.52 million tons of crude. China’s Politburo signaled it is planning to expand fiscal spending and have its first monetary easing since 2010, according to the official state Xinhua News Agency. The group said China will hit their target growth for 2024 of “around 5%”, with 2025 expected to be slightly higher than this year. China signaled they were considering allowing the yuan to weaken next year to offset the impact of the potential trade war with the Trump Administration. Leaders at China’s Central Economic Work Conference also mentioned they could increase their budget deficit and increase debt issuance at the local and central government levels, while also hinting at cutting interest rates. It appears no firm information detailing the stimulus packages will be released from this year’s Central Economic Work Conference, and we may not get anything concrete until China’s parliamentary meeting in March of next year, which typically includes the release of China’s full-year growth target and fiscal deficit. The National People’s Congress standing committee meeting is set to be held before December ends. The Shanghai based CSI 300 Index closed higher by +0.99%.
Yesterday’s Consumer Price Index showed headline inflation slightly higher, up to +2.7% year-over-year from +2.6% previously, while core CPI data, which excludes energy and food prices, stayed unchanged at +3.33%. U.S. Jobless claims rose last week, coming in at 242,000 vs a forecast of 220,000, this was the highest total since the first week of October. Headline Producer Price Inflation registered at +0.4% month-over-month vs a forecast of +0.2% MoM. CME’s Fedwatch Tool has raised the chance for another rate cut of 25 basis points at the Fed’s December 18th meeting to 98.1% as of this morning. All three major U.S. stock indexes closed lower, while The Dollar Index (DYX) closed higher by 0.25%.
This week’s EIA data showed U.S. crude inventories falling by -1.4 million barrels vs a forecast of -744,000 barrels, registering a total of 422 million barrels, which is about 6% lower than the five-year seasonal average. U.S. refiners operated at 92.4% capacity. The Cushing Oklahoma Hub had a draw of -1.3 million barrels. U.S. crude oil imports averaged 6 million barrels per day last week, a decrease of 1.3 million barrels per day from the previous week. API’s survey said crude oil stocks had increased by 499,000 barrels.
Reports circulated yesterday via Bloomberg sources that the Biden administration is weighing new sanctions against Russia’s oil industrying before Trump takes office on January 20th.
Price Thoughts – Crude was giving back most of yesterday’s gains, trading about a full dollar lower, until mid afternoon when the market turned positive, before finally settling 21 cents below the open. Mid $70 still seems to be WTI’s current resistance for Jan and Feb contracts. Crude has been content trading in the middle of its current range $66-$70.25, for roughly seven weeks now crude has traded between $66.5 and $72.5. Personally I would be looking to buy any price breaks under $66 at the moment. Settling below $67 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. To the upside ~$70.25 is still the short term resistance with mid ~$72 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 low $60’s to middle $70’s range, for long as there’s no black swan events.
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Jim Rinaudo
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