The February WTI (CLG25) trading session settled at 69.65 (-0.64) [-0.91%], a high of 70.54, a low of 68.81. Cash price is at 70.58 (-0.51), while open interest for CLG25 is at 321,009. CLG25 settled below its 5 day (70.08), below its 20 day (68.92), above its 50 day (69.37), below its 100 day (69.87), below its 200 day (72.84) and below its year-to-date (72.59) moving averages. The COT report (Futures and Options Summary) as of 12/10 showed commercials with a net short position of -227,239 (a decrease in short positions by +10,313 from the previous week) and non-commercials who are net long +214,911 (a decrease in long positions by -12,938 from the previous week).
If you would like to receive more information on the commodity markets, please use the link to join our email list Sign Up Now
Fresh data from the Federal Reserve’s Board of Governors showed November U.S. industrial production decreased by 0.1% in November compared to October, and is lower 0.9% than November of 2023. Manufacturing output increased by 0.2% in November compared to October, but was lower by 1% than November of 2023. Utilities were down 1.3% compared to October. According to Census Bureau data, U.S. retail sales beat their forecast, rising by 0.7% in November. October retail sales were revised upward to a 0.5% increase, previously it was 0.4% for October. The Fed met today and will meet again tomorrow where they are expected to cut rates again by 25 basis points. As of this morning the CME’s Fedwatch tool pegs it at a 95.4% chance, all but certain. All three major American stock indexes closed lower, with the Dow having its 9th consecutive negative day, something which hasn’t happened since 1978. The Dollar Index (DYX) closed higher by 0.08%.
Bloomberg reported that tanker-tracking data showed Russia’s seaborne crude exports fell by 11% over the last four weeks. Last month both the UK and EU put sanctions on Russia’s so-called “shadow fleet” of crude oil tankers. Last Friday U.S. Treasury Secretary Janet Yellen mentioned the Biden Administration is also considering putting on similar sanctions on the said shadow fleet of Russian oil tankers.
China’s National Bureau of Statistics released data showing China’s retail sales growth in November dipping deeper than expected at 3% year-over-year against a forecast of 5% and below October’s 4.8%. However, China’s November industrial production came in higher than its forecast, hitting 5.4% year-over-year against a forecast of 5.3%. Reuters reported that China’s November crude oil imports hit a fourteen-month high, showing a surplus of roughly 1.77 million barrels per day, with an average import of 11.81 million barrels per day. The National Bureau of Statistics said China’s oil refineries processed about 14.24 million barrels per day, up 0.2% year-over-year. 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. In November China was shown to have imported and produced roughly 1.77 million barrels per day more than it consumed. Last week 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 to 4% of their GDP and increase debt issuance at the local and central government levels, while also hinting at cutting interest rates. The National People’s Congress standing committee meeting is set to be held in late December. The Shanghai based CSI 300 Index closed higher by 0.26%.
Price Thoughts – After crude hit a 3 and a half week high and 6% rally last week, crude gave back some of its gains yesterday and sold off further today after weaker than expected Chinese economic data was released yesterday. Passing and settling through key moving averages last week (the 7, 20, 50 and 100), $72.50 still seems to be the resistance for Feb contracts. Crude has been content trading in the middle of its current range of $66-$72.25 for over two months at this point, and failed once again to stay above its 100 day moving average. 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.
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 by year’s end. 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. As for the European Union, their economic situation has been trending down for some time now.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 targeting their energy revenue. With the prevailing themes of a stronger dollar, potential trade wars, increasing global production, 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.
If you would like to receive more information on the commodity markets, please use the link to join our email list Sign Up Now
You can reach me at – [email protected]
Follow Walsh Trading on X – @Walsh_trading
Jim Rinaudo
312-957-4731
Walsh Trading
311 S Wacker Suite 540
Chicago, IL 60606
Walsh Trading, Inc. is registered as a Guaranteed Introducing Broker with the Commodity Futures Trading Commission and an NFA Member.
Futures and options trading involves substantial risk and is not suitable for all investors. Therefore, individuals should carefully consider their financial condition in deciding whether to trade. Option traders should be aware that the exercise of a long option will result in a futures position. The valuation of futures and options may fluctuate, and as a result, clients may lose more than their original investment. The information contained on this site is the opinion of the writer or was obtained from sources cited within the commentary. The impact on market prices due to seasonal or market cycles and current news events may already be reflected in market prices.PAST PERFORMANCE IS NOT NECESSARILY INDICATIVE OF FUTURE RESULTS. All information, communications, publications, and reports, including this specific material, used and distributed by Walsh Trading, Inc. (“WTI”) shall be construed as a solicitation for entering into a derivatives transaction. WTI does not distribute research reports, employ research analysts, or maintain a research department as defined in CFTC Regulation 1.71.