The February WTI (CLG25) trading session settled at 69.24 (-0.22) [-0.32%], a high of 69.94, a low of 68.59. Cash price is at 69.46 (+0.08), while open interest for CLG25 is at 345,037. CLG25 settled below its 5 day (69.61), above its 20 day (68.93), above its 50 day (69.11), below its 100 day (69.73), below its 200 day (72.77) and below its year-to-date (72.54) moving averages. The COT report (Futures and Options Summary) as of 12/17 showed commercials with a net short position of -237,003 (an increase in short positions by -35,493 from the previous week) and non-commercials who are net long +229,990 (an increase in long positions by +39,878 from the previous week).
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President-elect Trump posted comments over the weekend on his Truth Social platform calling for U.S. control of the Panama Canal, citing excessive fees America pays and increasing Chinese influence over the canal. China does not directly control or administer the Panama Canal; however, a subsidiary of Hong Kong-based CK Hutchison Holdings manages two ports at the canal’s Caribbean and Pacific entrances. The Panama Canal handles roughly 2% of global crude oil supply flows. Elsewhere Trump brought back his idea of purchasing Greenland from Denmark. The US Geological Survey has previously estimated that around 17.5 billion barrels of oil and 148 trillion cubic feet of natural gas are located in Greenland’s offshore area, as well as a swath of rare earth minerals and lithium deposits within the mainland. Trump’s incoming National Security Advisor Mike Waltz announced that the new administration would focus on directly targeting Iran’s oil industry as a means of financially constraining the country. All this comes after Trump’s message directed at the European Union on Friday, stating that either the EU could buy more American produced oil and gas or face increased tariffs.
Overseas the Druzhba Pipeline is back online flowing oil from Russia to Europe after being halted on December 19th due to a technical issue. The Druzhba pipeline has a total capacity to transport ~2 million barrels per day, the halt had affected the pipeline’s southern branch which transported ~300,000 barrels per day to European countries with granted exemptions from the Unions ban on Russian pipeline oil.
As expected the Federal Reserve cut rates by 25 basis points at last week’s FOMC meeting, marking the third time rates have been cut this year. The Federal Reserve now forecasts two rate cuts for next year, previously the Fed expected there could be as many as three or four. The next possible rate cut could come at the Fed’s March 18-19th meeting. The Fed raised their 2025 projections for Unemployment (4.3% rate vs. prior 4.4%), PCE Inflation (2.5% rate vs. prior 2.1%) and Core PCE Inflation (2.5% vs prior 2.2%). The Dow and S&P are on pace for their worst month since April. Today’s Consumer Confidence report showed the index falling 8.1 points, which pulled back to a three-month low of 104.7. The Dollar Index (DYX) closed higher by 0.43%.
American Petroleum Institute data will be released tomorrow, while the EIA’s weekly report will be released Friday. Markets will be open for half the day tomorrow and closed Wednesday for Christmas.
A preliminary Reuters poll released this morning is predicting U.S. crude oil stocks fell by ~2 million barrels. Last week’s EIA data showed a draw of -934,000 barrels against a forecast of 1.6 million barrels, total crude oil inventories stand at 421 million barrels, roughly 6% below the five-year seasonal average. U.S. crude imports averaged 6.6 million barrels per day last week, an increase of 665,000 barrels per day over the previous week. Crude oil refinery inputs averaged 16.6 million barrels per day, about 48,000 barrels per day less than the previous week’s average, while refineries operated at 91.8% capacity. The American Petroleum Institute data said there was a -4.69 million barrel draw for U.S. crude oil inventories, the fourth straight weekly decline. The API figure showed the Cushing, OK hub having a +800,000 barrel build.
Price Thoughts – Bloomberg reported over the weekend that Hedge Funds had increased their long positions by over +57,000 contracts, which was the largest move since September 2023, which is significant in my opinion. Brent and WTI had their third negative week over the past four weeks last week. Crude has been content trading in the middle of its current range of $66-$72.25 since mid-October, and failed once again to stay above its 100 day moving average last week. I would urge patience until the Holidays are over, I suspect we continue to trade sideways with thinner volume until we hit the first week of the new year. $72.50 still seems to be the resistance for Feb contracts.
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Jim Rinaudo
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