The February WTI (CLG25) trading session settled at 73.56 (-0.40) [-0.54%], a high of 74.99, a low of 73.20. Cash price is at 73.94 (+0.84), while open interest for CLG25 is at 310,913. CLG25 settled above its 5 day (72.66), above its 20 day (70.27), above its 50 day (69.41), above its 100 day (69.67), above its 200 day (72.65) and above its year-to date (73.52) moving averages. The COT report (Futures and Options Summary) as of 12/24 showed commercials with a net short position of -271,751 (an increase in short positions by -15,345 from the previous week) and non-commercials who are net long +266,318 (an increase in long positions by +18,085 from the previous week).
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The White House announced this morning that President Biden will be moving forward with his executive order to permanently ban new offshore oil and gas development in more than 625 million acres of U.S. coastal waters. According to Bloomberg, “Biden’s planned declaration is rooted in a 72-year-old law that gives the White House wide discretion to permanently protect US waters from oil and gas leasing without explicitly empowering presidents to revoke the designations.” In an interview with Hugh Hewitt this morning incoming President Trump said “The good news is I can change it immediately, it’ll be changed on day one.” It was also reported that the Biden administration is looking to tack on more sanctions on Russia’s oil market before leaving office on the 20th, specifically targeting shipping tankers, Reuters reported.
On Truth Social, President-elect Trump dismissed a story published by the Washington Post, who cited anonymous sources claiming Trump would alter and roll back some of his proposed tariff policies. In response Trump said the Washington Post story was quote “just another example of Fake News.”. The U.S. Dollar Index closed lower by -0.66%.
Canada’s Prime Minister Justin Trudeau announced he would be stepping down after Canada held elections to find his replacement. On online betting markets, such as Polymarket, Pierre Poilievere, leader of the Conservative Party of Canada, has the highest odds to succeed Mr. Trudeau. Mr. Poilievre has said in past interviews that he would repeal Canada’s carbon tax, roll back red tape affecting the country’s energy policies, and work to open new Canadian oil refineries, nuclear power plants, and natural gas facilities, while also remaining committed to green energy initiatives.
After previously being rumored last week, Saudi Aramco has raised its crude oil prices for the Asian market for February by 60 cents per barrel, which is the first increase in three months after selling at a four-year low in December. I believe, as well as many others who follow the crude markets, that this signals Saudi’s optimism that oil demand is picking up.
U.S. dockworker union leaders and the U.S. Maritime Alliance will resume negotiations tomorrow. The previous dockworkers’ strike was halted in October after the parties reached a tentative deal. The deadline for a new agreement is January 15th. Roughly 47,000 dockworkers on the East and Gulf Coast will be affected, and according to data from the American Association of Port Authorities, the affected ports handle about half of America’s container volumes. The world’s second largest container carrier, Maersk, told companies last week to remove cargo from the affected ports before January 15th. Economists estimate that daily lost revenue could range from $1 billion to $5 billion, with the potential for this figure to grow as the strike continues.
China announced that they will begin construction on the world’s largest hydropower dam this year. The 31-mile, 300 billion kWh dam will be built in Tibet and will be larger than the world’s current largest hydropower dam, the Three Gorges Dam, which was also built by China. There are international concerns about ecological damage and water supplies for villages downstream of the dam site, particularly in India. The Shanghai based CSI 300 index closed lower by -0.16%.
As for the week ahead, the Fed will release its minutes from its December meeting on Wednesday. Thursday China will release inflation data and American markets will have shortened trading sessions in observance of former President Carter’s death. On Friday the U.S. releases jobs data and the start of Q4 earnings season begins.
Last week the Energy Information Administration (EIA) data showed U.S. energy stocks decreasing for the sixth consecutive week. Crude Oil inventories decreased by 1.2 million barrels, to a total of 415.6mb, which is about 5% lower than the five-year seasonal average. Oil imports rose by 455,000 barrels per day, to a total of 6.9 million barrels per day. U.S. refineries operated at 92.7% of their capacity, with an increase in output of 41,000 barrels per day over the previous week’s data, in total averaging 16.9 million barrels per day. The EIA said U.S. crude oil production hit a record high in October, producing 13.46 million barrels per day. While Oil demand hit its highest mark since 2020 at 21.01 million barrels per day. Last week’s API data showed U.S. inventories falling by 1.4 million barrels last week.
Price Thoughts – After 5 straight sessions of gains crude oil traded all the way up to $74.99 before selling back into “$73 and change” territory. Crude oil finally broke out above its 200 day moving average last week, settling firmly higher than its $72.50 resistance it’s traded under the last 3 months. Crude could make a run towards $77 (last time trading at that level was early October for CLG25) or trade back below $72.50 into our previous 3 month range if momentum stalls below $75, in my opinion. Rolling from the February contract into March and April is beginning to pick up. Short-term I’m still leaning bullish with the current U.S. supply and demand situation, the northern hemisphere cold blast and potentially continued Chinese stimulus announcements and increasing demand situation. The market was due for a sell off today, in my opinion, after 5 consecutive days of run up and traders coming back from the holidays, I think we saw some profit taking, some rolling into further dated contracts and some shorts getting in around $75. Longer term for 2025 I believe we’ll still trade somewhere, on average, between a $10 range of $65-$75 for WTI, so long as current conditions persist.
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Jim Rinaudo
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