The March WTI (CLH25) trading session settled at 71.00 (+0.39) [+0.55%], a high of 71.41, a low of 70.47. Cash price is at 70.62 (-0.43), while open interest for CLH25 is at 266,938. CLH25 settled below its 5 day (71.70), below its 20 day (74.36), below its 50 day (71.60), above its 100 day (70.45), below its 200 day (71.98) and below its year-to date (74.05) moving averages. The COT report (Futures and Options Summary) as of 2/7/25 showed commercials with a net short position of -274,046 (a decrease in short positions by +33,610 from the previous week) and non-commercials who are net long +244,944 (a decrease in long positions by -36,265 from the previous week).
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This afternoon, President Trump announced he would be announcing a reciprocal tariff plan on any trade partners imposing counter tariffs on the United States, fulfilling campaign promises to do as such. January’s jobs report showed 143,000 jobs added for the month, while the unemployment rate registered at 4%. U.S. Factory orders declined by 0.9% in December, the Commerce Department’s Census Bureau said yesterday. After 26 consecutive months of contraction, the U.S. ISM Manufacturing PMI expanded in January. January’s ISM Manufacturing PMI hit 50.9, beating forecasts of 49.5, and grew from Decembers 49.2 An updated weather forecast for February has issued an Arctic Blast warning for much of the Midwest and Northeast USA for this week and next. Next Wednesday the Consumer Price Index report will offer another read on inflation. The S&P, Dow Jones and Nasdaq indexes all closed lower while the U.S. Dollar Index closed higher by +0.38%
This week’s U.S. Energy Information Administration report for the week ending January 31, showed U.S. commercial crude oil inventories with a build of +8.7 million barrels from the previous week, markedly above its forecast of +2.4 million barrel build, to a total of 423.8 million barrels, inventories are about 5% below their five-year seasonal average. U.S. crude oil imports averaged 6.9 million barrels per day, an increase of 467,000 barrels per day. U.S. crude oil refinery inputs averaged 15.3 million barrels per day, a 159,000 barrels per day increase over the previous week, while refineries operated at 84.5% capacity, 1% higher than the previous week. This was the second consecutive week the EIA has reported commercial crude inventory builds, following last week’s +3.46 million barrel build, and so far the largest weekly build for 2025. This week’s American Petroleum Institute weekly report showed a U.S. crude stock build of +5.025 million barrels, against a forecast of a +3.170 million barrel build. The Cushing, Oklahoma hub had a build of +110,000 barrels. This is the second consecutive week of inventory expansion reported by the API, following the prior week’s +2.86 million barrel build.
Analysts from J.P. Morgan estimated global oil demand hit 101.5 million barrels per day in January, as told to Rigzone. A Reuters survey released this week figures OPEC+’s oil production declined in January, with a combined output drop of 50,000 barrels per day, this would mark the second consecutive month of lower output by the cartel. On Monday, leaders from OPEC+ gathered at the Joint Ministerial Monitoring Committee, where the cartel said it has not changed its decision to begin gradually unwinding 2.2 million barrels per day of voluntary production cuts in April. On Monday, Saudi Aramco raised its March crude oil prices for the Asian market, to $1.50 a barrel over the Omani/Dubai average, from January’s $0.90 premium.
On Tuesday, after the United State’s 10% tariffs took effect on Chinese goods, China’s Finance Minister said that the country would impose tariffs of 15% on coal and LNG imports, as well as levying 10% higher duties on crude oil from the United States, starting February 10th. On Thursday, the U.S. Treasury said it would impose new sanctions on tankers and individuals funneling Iranian crude oil into China. According to EIA data, the U.S. sent China 195,000 barrels per day in November 2024. According to tanker-tracking data, Kpler estimates the U.S. exported an average of 166,000 barrels per day in 2024 to China, resulting in 5% of all U.S. oil exports. Yesterday, President Trump said, “I will speak to Xi at the appropriate time, I’m in no rush”. China’s Shanghai based CSI 300 Index rose +0.96%.
President Trump has reapplied his “Maximum Pressure” policies on Iran, directing his Treasury and State Department towards “driving Iran’s oil exports to zero.” According to the EIA, Iran, the fourth-largest crude oil producer in OPEC+, accounts for about 3% of daily global output. Its oil exports generated $53 billion in 2023, with around 1.7 million barrels exported per day in 2024. Iran is also one of the top suppliers of crude oil to China, with China being its main source for exports.
On Monday Prime Minister Trudeau posted on his X account, saying, ‘I just had a good call with President Trump,’ and ‘Proposed tariffs will be paused for at least 30 days while we work together.’ Previously on Saturday, Canada’s Prime Minister announced that there would be 25% retaliatory tariffs on $155 billion worth of U.S. goods; it will now have to wait and be seen if these tariffs are put on a month from now. Canada accounts for more than half of America’s total petroleum imports annually, while it represents about 8% of America’s yearly petroleum exports, according to USAfacts.org. Last Friday’s Baker Hughes rig count report showed Canada’s oil rig count up by 12, to a total of 186.
Like Canada, Mexico and the Trump Administration were able to work out a deal that would see Mexico immediately deploy 10,000 Mexican soldiers to the Mexico-U.S. border while America would delay the 25% tariffs on Mexican goods until March 1st. And like President Trudeau, Mexico’s President Claudia Sheinbaum vowed to put on retaliatory tariffs on the United States if Trump decides to impose tariffs, although details on these retaliatory tariffs have been sparse. Per USAfacts.org, Mexico accounts for about 11% of America’s total petroleum exports and 11% of the United States’ total crude oil imports.
Price Thoughts – Significant builds reported from the EIA and API this week continued to outweigh some of the bullish geopolitical situations again today, that is until Trump’s reciprocal tariff story broke late in the session, in my opinion today. Our 50 day moving average should again be tested next week, settling below that on Monday could see a downtrend towards $69-$67 next week and again I expect price discovery to take cues from the EIA and API weekly data. I don’t see price volatility easing over the next month until the North American tariff discussions settle out and we see what China’s leaders have to say now that they’re back from holiday. There is talk that Trump will release his plan to end the war in Ukraine next week, with a plan to end the war by Easter. I’m interested to see how soon sanctions would be taken off Russia’s oil arm as part of the deal. Prices are still down about 10% since mid January. To the downside we have support near $70, further at $67 and change (which I believe we may make a run towards with this current selling moment), and below that $65 has been a major support figure over the last year. To the upside there’s resistance near $74.50 and the upper $79.50 region, beyond that there’s a chance, in my opinion, we could make a run towards the upper resistance point of ~$85 if demand picks up via China, a return of the Middle East war premium or the right tariff trade disruptions develop. Although longer term I think we are still leaning more into the $65-$80 range rather than the $70-$85 range for 2025.
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Jim Rinaudo
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