The December WTI (CLZ24) trading session settled at 71.47 (+1.98) [+2.85%], had a high of 71.81, a low of 70.25. Cash price is at 69.52 (+0.23), while open interest for CLZ24 is at 339,370. CLZ settled above its 5 day (69.26), below its 20 day (70.78), above its 50 day (70.17), below its100 day (73.04) and below its 200 day (74.29) moving-averages. The COT report (Futures and Options Summary) as of 10/29 showed commercials with a net short position of -211,631 (a decrease in short positions by 18,244 compared to the prior report) to non-commercials who are net long +182,643 (a decrease in long positions by 21,347 compared to the prior report).
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Oil markets began trading higher Sunday night after OPEC+ agreed to delay their planned December oil output rollout by one month. The rollout would have begun with an 180,000 barrels per day increase starting in December, gradually restoring 2.2 million barrels per day by the end of next year. OPEC+ is currently withholding 5.86 million barrels per day (roughly 5.7% of global crude demand). OPEC+ is scheduled to have their next meeting on December 1st. OPEC+ forecast oil demand growth at 1.93 million barrels per day for this year and 1.64 million barrels per day for 2025. This counters the International Energy Agency’s assessment, which sees global oil demand increasing by ~900,000 barrels per day for this year and ~1 million barrels per day for 2025.
The Wall Street Journal reported Sunday night that Iran is planning a retaliation strike on Israel involving “powerful warheads and other weapons”, with Iran’s Supreme Leader Ali Khamenei pronouncing that there would be a “tooth-breaking response” and Iran’s top general warning of “an unimaginable response”. This newest “tit for tat” comes after Israel took out defensive military equipment that protected Iran’s energy facilities. Iranian sources said the response will happen sometime after the U.S. election but before the presidential inauguration. On Friday the Pentagon announced that they would be sending B-52 bombers, additional fighter jets, and Navy Destroyers to the region.
Traders will be watching to see what Fed Chair Jerome Powell decides to do with interest rate cuts this Thursday at the Federal Open Market Committee meeting. Economists expect interest rates to be cut by 25 basis points, with the CME Fedwatch tool currently showing a 98% probability. Last week’s U.S. jobs report was disappointing, showing only +12,000 jobs created against a forecast of +112,500 jobs created that economists had expected, the unemployment rate stayed flat at 4.1%, while job gains for August and September were revised lower by a combined 112,000 positions. Last week’s U.S. GDP number covering the July through September quarter came in at 2.8%, slightly weaker than the previous 3% that covered the April through June quarter. The Dollar Index (DXY) closed lower on the day by 0.38%.
The Standing Committee of China’s National People’s Congress is holding policy meetings this week, conveniently coinciding with the U.S. presidential election. In my opinion if Trump is elected we should expect a higher probability of economic stimulus packages announced in the near term out of China, to counter the potential trade war and tariff idea’s Trump may impose. Last week China’s National Bureau of Statistics released October’s Manufacturing PMI data, which exceeded market forecasts, showing factory growth for the first time since April and factory output growth for the second straight month, bullish data for crude oil and a sign that may signal to Chinese Officials that their stimulus packages have had a positive impact on their economy. The Shanghai CSI 300 Index closed higher by +1.41%.
There’s a new tropical storm developing in the Caribbean and making its way towards the Gulf of Mexico, with the potential to become Hurricane Rafael by the end of the week.
Tomorrow we’ll get updated American Petroleum Institute data on U.S. oil inventories.
Price Thoughts – Looking at the chart here, I see our current $67 support line holding on strong, and the next resistance to test is around ~$72 for the upside, which could push us to $75. I would expect higher volatility from now till the dust settles between the U.S. election and the potential Iran retaliation, no doubt the risk has increased for the shorts right now with all this uncertainty.
If Donald Trump is elected to President this week I believe he’ll fulfill his promise to “Drill baby, drill”, significantly increasing the output capacity for American energy. That 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 then there’s the Middle East situation, which could simmer or explode. 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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