The December WTI (CLZ24) trading session settled at 68.05 (-0.12) [-0.12%], had a high of 69.13, a low of 67.75. Cash price is at 68.07 (-2.32), while open interest for CLZ24 is at 197,298. CLZ settled below 5 day (69.38), below its 20 day (69.86), below its 50 day (69.89), below its 100 day (72.53) and below its 200 day (74.18)]
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OPEC+ this morning cut their global oil demand forecast for this year and next for the fourth consecutive month. The institution sees oil consumption increasing by 1.8 million barrels per day in 2024, averaging 104 million barrels per day globally, this is 107,000 barrels per day less than the previous forecast. For 2025 OPEC+ predicts that daily global demand will increase by 1.5 million barrels, 103,000 barrels less than the previous forecast. OPEC+ cited the lessening demand out of China, India and Africa as reasons for lowering the forecast. Total crude oil production for OPEC+ averaged 26.53 million barrels per day in October, up by 466,000 barrels compared to September. The report also showed that Russia and Iraq were still currently producing more than the agreed upon OPEC+ quota. There was no update on the production increase that is set to begin in December and gradually increase through next year. OPEC+ is set to hold a major policy meeting on December 1st.
We’ll have fresh U.S. inflation data this week via the Consumer-Price Index for October released tomorrow and Retail Sales data on Friday. Fed Chair Jerome Powel will also speak again this Thursday, with the CME Fedwatch Tool currently showing a 65% chance for another interest rate cut in December. Regarding the U.S. election the Republican party has swept the House, Senate and Presidency, which should help Trump pass his business friendly agenda. Yesterday, President-elect Trump picked Lee Zeldin to lead the Environmental Protection Agency. Zeldin is expected to roll back much of the Biden administration’s regulations in regards to climate and pollution and reducing red-tape when it comes to the shale and coal industries. The USD is currently sitting near four-month highs, the U.S. Dollar Index closed higher by 0.40%
Weekend data out of China showed China’s Consumer-Price Index decreased from the previous month, coming in at 0.3% for October, which was below economists forecast of 0.4%, while China’s Producer-Price Index declined for the 25th straight month and had a 2.9% fall from the previous month. This was the worst consumer price growth for China in four months. Saudi Arabia also lowered their crude delivery forecast for China to 36.5 million barrels for December, the second consecutive month of lower shipments and roughly ~10 million less barrels than were shipped in October. Reuters reported this morning that U.S. crude exports rebounded in China in the month of October, up to 130,000 barrels per day, citing tracking data from Kpler, exports in August were previously near 4 year lows. On Friday China will put out fresh industrial output numbers for October. The Shanghai CSI 300 Index closed lower by -1.10%.
Tomorrow the U.S. EIA is putting out a new short-term energy outlook and the American Petroleum Institute energy stocks data is released. On Thursday the International Energy Agency will put out its own monthly oil market report while the EIA will put out its U.S. oil inventory data.
Price Thoughts – Personally I would be looking to buy any price breaks under $67 at the moment. Settling just above $67 this week could see a further price break towards the next support line around ~$65, which has been a major support line over the last few years. To the upside ~$72 is still the resistance. In the short term I would expect higher volatility from now till the potential Iranian military retaliation against Israel, if there is one.
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, possibly 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’s energy market. 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 $65 to middle $70’s range, for long as there’s no black swan events.
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Jim Rinaudo
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