The December WTI (CLZ24) trading session settled at 68.04 (-2.34) [-3.32%], had a high of 70.56, a low of 67.92. Cash price is at 70.39 (-2.00), while open interest for CLZ24 is at 279,129. CLZ settled above its 5 day (70.92), above its 20 day (70.06), above its 50 day (69.92), below its 100 day (72.74) and below its 200 day (74.24) 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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The Standing Committee of China’s National People’s Congress held policy meetings last week. China did end up passing the issuance of 1.4 trillion yuan in local debt, which was expected, but did not announce any other major stimulus packages, which in my view was not enough to shrug off bearish economic China sentiment for traders. 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 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 higher by +0.66%.
Hurricane Rafael has now weakened to a tropical storm in the Gulf of Mexico, but it did manage to shut-in 27.59% of U.S. oil production capacity in the region as of Sunday, the Bureau of Safety and Environmental Enforcement disclosed.
For the second consecutive FOMC meeting the Federal Reserve lowered interest rates, this time by 25 basis points after September’s 50 basis points reduction. Meanwhile the stock indexes continue to make new all time highs, while other commodity futures are in the midst of some price adjustment due to Trump expectations and the strengthening of the dollar. We’ll have fresh inflation data this week via the Consumer-Price Index for October on Wednesday and Retail Sales data on Friday. Fed Chair Jerome Powel will also speak again this Thursday, the CME Fedwatch Tool currently shows a 65% chance for another interest rate cut in December. Regarding the U.S. election it looks like the Republican party will sweep the House, Senate and Presidency, which should help Trump pass his business friendly agenda. The USD is currently sitting near four-month highs, the U.S. Dollar Index closed higher by 0.48%.
Tomorrow OPEC+ releases its monthly oil market report. On Wednesday the U.S. EIA is putting out a new short-term energy outlook and the American Petroleum Institute 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. WTI broke through its 5, 20 and 50 day moving averages to the downside today. Settling below $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.
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 $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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