The January WTI (CLF25) trading session settled at 68.37 (+1.17) [+1.74%], a high of 68.88, a low of 67.08. Cash price is at 67.20 (-1.13), while open interest for CLF25 is at 268,503. CLF25 settled below its 5 day (68.42), below its 20 day (68.64), below its 50 day (69.84), below its 100 day (70.48), below its 200 day (73.37) and below its year-to-date (73.10) moving averages. The COT report (Futures and Options Summary) as of 12/3 showed commercials with a net short position of -237,552 (a increase in short positions by -3,881 from the previous week) and non-commercials who are net long +227,849 (a increase in long positions by +1,418 from the previous week).
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Overnight 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’s top leaders will next gather for the Central Economic Work Conference being held on the 11th and 12th. My guess is we’ll have a better understanding of how exactly China plans to dole out these stimulus packages by the time this conference is wrapped up. If figures aren’t released after this week’s conference the next major meeting will be The National People’s Congress standing committee meeting set to be held before December ends. The Shanghai based CSI 300 Index closed lower by -0.17%
Syrian rebels seized Damascus on Sunday, forcing Syrian President Bashar al-Assad to flee the country. There have been some small skirmishes overnight including Israel reinforcing part of their shared borderlands in Syria and the American military striking ISIS encampments inside Syria. The stability of the country going forward is being debated, as well as just how moderate the leading Islamic opposition group, the Hayʼat Tahrir al-Sham (a former Al-Qaeda ally and still designated as a terrorist organization by the U.S.), will govern going forward. Syria is estimated to hold 2.5 billion barrels of oil reserves as of 2018, in 2023 the country produced 40,000 barrels per day according to the Statistical Review of World Energy.
Saudi Arabia’s Aramco announced that starting in January they would be lowering the sales price of its Arab Light grade crude oil to the Asian market, to a premium of $0.90 a barrel compared to the Dubai benchmark. Currently Aramco’s premium to Asia sits at $1.70.
OPEC’s Monthly Oil Market report will be released Wednesday and the International Energy Agency will release their monthly oil market report on Thursday.
U.S. employment data from last week was mixed, there were 227,000 jobs created in November against economists forecast of 220,000, however the unemployment rate increased to 4.2%. October and September jobs numbers were also revised, adding 56,000 more jobs than initially stated over that period. There will be new inflation data via the Consumer Price Index which will be released this Wednesday. CME’s Fedwatch Tool has raised the chance for another rate cut of 25 basis points at the Fed’s December 18th meeting to 85.8% as of this morning, up from the 75% mark it was sitting at last week. The three major American stock indexes all closed lower today after hitting fresh all-time highs last Friday. The Dollar Index (DYX) closed higher by 0.08%.
Last week OPEC+, led by Saudi Arabia and Russia, have agreed to delay their production undwinding until April 2025, which would last through September 2026, restoring 180,000 barrels per day until the currently withheld 2.2 million barrels per day are back online. The International Energy Agency predicts that even if OPEC+ continues to delay their production cuts through next year, that there will still be over a 1 million barrels per day surplus next year.
Last week’s U.S. Energy Information Administration report showed a crude inventory draw of -5.1 million barrels, against a forecast of a -717,000 barrel draw, seasonally U.S. crude oil inventories are roughly 5% lower than their five-year average. U.S. refineries were operating at a 93.3% capacity last week. U.S. crude imports averaged 7.3 million barrels per day, an increase of 1.2 million barrels per day over the previous week. Last week’s API (American Petroleum Institute) report showed crude inventories increasing by +1.23 million barrels, while the Cushing Hub had an increase of +112,000 barrels.
Price Thoughts – Crude seems for now to be content trading in the middle of its current range $66-$70.25, for roughly six weeks now crude has traded between $66.5 and $72.5. Personally I would be looking to buy any price breaks under $66 at the moment. Settling below $67 could see a further price break towards the next support line around ~$65 flat, which has been a major support line over the last few years. To the upside ~$70.25 is still the short term resistance with mid ~$72 after that. In the short term I would expect higher volatility with the current geopolitical tensions, but there’s still a weight on prices via the demand situation.
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, 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. 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 low $60’s to middle $70’s range, for long as there’s no black swan events.
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Jim Rinaudo
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