The Nov WTI (CLX24) trading session settled at 73.57 (-3.57) [-4.63%], had a high of 77.33, a low of 72.69. Cash price is at 77.15 (+2.82), while open interest for CLX24 is at 242,047. CLX settled above its 5 day (73.84), its 20 day (70.41), its 50 day (71.80), but below its 200 day (74.90) ((broke below its 200 day to the downside today)) moving-averages. The COT report (Futures and Options Summary) as of 10/4 showed commercials with a net short position of -215,898 (a increase in short positions by 6,662 compared to last week) to non-commercials who are net long 198,109 (a increase in long positions by 6,962 compared to last week). The Dec contract now has larger open interest than the Nov contract.
As I said in yesterday’s commentary, I thought the market was short-term overbought and the rally was partially put on from retail traders trying to time Israel’s retaliation on Iran…Until there’s a strike on energy sites I think there’s still downward pressure crude is facing, which I think pushes us back into that high $60 low $70 range. This of course could go completely the opposite way depending on the size and scale of Israel’s retaliation on Iran, or if there becomes a blockade of the Strait of Hormuz. But if Israel chooses to go with merely a strategic smaller-scale retaliation, I would expect at some point there soon after OPEC and the U.S. filling the gap on the production loss Iran may incur (For context Iran produces 4 million barrels per day, ~4% of global production according to the EIA). A blocaide of the Strait of Hormuz, in my opinion, would be much more bearish for crude oil than targeted strikes on energy facilities, as ~21 million barrels flow through per day according to the EIA, which accounts for ~21% of the global crude trade. U.S. Defense Secretary Lloyd Austin is meeting with his Israeli counterpart tomorrow in Washington, any headline grabbing language could dictate tomorrow’s price movement. Elsewhere in the Middle East Libya is close to being back 100% to pre-shutdown production, with the country pumping 1.2mbpd.
One of China’s top economic policy makers Zheng Shanjie held a meeting today, telling reporters he was “fully confident” of achieving economic targets for 2024, but did not go into specific detail on any new stimulus measures. This I believe was getting priced in today, as the uncertainty is disappointing and bearish for crude demand and China’s economy in general. In an economic update released earlier today the World Bank revised China’s growth rate to 4.3% for next year, which is lower than the 4.8% projected growth rate for this current year. The Chinese Stock Index, the CSI 300 is still up over 25% over the last 5 trading sessions, and was up over 5% again today.
In the U.S. Florida is again facing another Hurricane, upgraded to a Category 5 Hurricane Milton is expected to make landfall as a Category 3 tomorrow. This is expected to be the worst Hurricane to hit west-central Florida in 100 years. From what I’ve read it’s supposedly not going to push as many oil platforms in the region offline compared to Hurricane Helene, but I believe the number of platforms that pause operations will be over zero. There’s also the rebuilding in the region that will need to be done after a particularly strong and devastating Hurricane season.
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Jim Rinaudo
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