The March WTI (CLH25) trading session settled at 72.62 (-1.15) [-1.56%], a high of 7, a low of 7. Cash price is at 73.79 (+0.64), while open interest for CLH25 is at 328,606. CLH25 settled below its 5 day (73.82), below its 20 day (74.66), above its 50 day (71.14), above its 100 day (70.04), above its 200 day (72.15) and below its year-to date (74.84) moving averages. The COT report (Futures and Options Summary) as of 1/21/25 showed commercials with a net short position of -339,516 (an increase in short positions by -7,065 from the previous week) and non-commercials who are net long +321,973 (a decrease in long positions by -1,156 from the previous week).
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Today’s weekly EIA report showed U.S. commercial crude oil inventories increasing by +3.46 million barrels, above forecasts of a +3.2 million barrel build, bringing inventories to a total of 415.1 million barrels. Crude oil refinery inputs averaged 15.2 million barrels per day, lower than the previous week’s report by 330,000 barrels per day. Refineries operated at 83.5% capacity, lower than the previous week’s 85.9% capacity. U.S. oil imports decreased by -297,000 barrels per day compared to last week’s report, to a total of 6.448 million barrels per day. U.S. oil exports averaged 3.686 million barrels per day. The EIA showed a draw of 326,000 barrels from the Cushing, Oklahoma Hub. Yesterday’s American Petroleum Institute weekly report showed a crude inventory build of +2.86 million barrels. The Cushing, Oklahoma hub had a draw of -144,000 thousand barrels. U.S. production was down 237,000 barrels per day. U.S. crude oil inventories are about 6% below the five-year seasonal average. This was the first week of inventory builds for crude oil seen in the API and EIA weekly reports following nine consecutive weeks of inventory draws.
On Monday, President Trump floated the idea of universal 2.5% tariffs, it was reported by the Financial Times that new Treasury Secretary Scott Bessent favors a 2.5% universal tariff that gradually increases over time, potentially upwards of 20%, citing four unnamed sources familiar with the plan. Speaking yesterday White House press secretary Karoline Leavitt again reiterated that tariffs on China, Canada and Mexico will begin as soon as February 1st. Energy markets will be anxiously awaiting to see if tariffs are put on Canada’s energy producers this weekend. As expected the Fed unanimously voted to leave interest rates unchanged, although they said that “inflation remains somewhat elevated. The Fed will meet next March 19th. The U.S. Q4 GDP estimate will be released Thursday. The S&P, Dow Jones and Nasdaq indexes closed lower while the U.S. Dollar Index closed higher by +0.9%.
Ukraine’s Military said Russian oil refineries in the Nizhny Novgorod region were targeted by drones. The targeted Lukoil’s Norsi oil refinery is Russia’s fourth largest in the country, processing 340,000 barrels of crude per day. This comes after Ukraine targeted the Ryazan refinery last Friday and Sunday, and according to sources, shut down operations due to the attacks. Russian newspaper Kommersant reported that Russian crude oil exports dipped by 2.2%, exporting a total of 295.12 million tons in 2024, citing an unnamed source with knowledge of Russia’s export data. Reuters has reported that the U.S. sanctions placed on January 10th on Russia’s shadow fleet have driven India and China to seek out non-sanctioned Russian tankers, which has begun to drive premiums and supply disruptions in the Asian market.
In the Middle East, two ports in Libya were briefly halted due to protests, the ports export roughly 450,000 barrels per day combined. Libya’s National Oil Company has said protests have halted and operations are back under control. Israel and Lebanon have extended their ceasefire to February 18th. In Gaza, Palestinians have begun returning to northern parts of the strip. There is some ongoing shakiness over Israel breaking the terms of the ceasefire agreements in both Lebanon and Gaza over the weekend and the first half of this week. President Netanyahu is expected to meet President Trump in Washington next week. The fire that started last Friday, which has since been contained, at the Rumaila oilfield in Iraq continues to disrupt production, affecting about 300,000 barrels per day, according to an Iraqi official speaking to Bloomberg.
Leaders from OPEC+ will meet next week, February 3rd. So far the cartel has made no comments regarding President Trump’s plea for the group to help lower oil prices.
According to China’s National Bureau of Statistics, China’s manufacturing activity in January fell short of economists’ expectations, with the Manufacturing PMI dropping to 49.1 from 50.1 in December. This was below the Reuters forecast of 50.1 for January and marked the weakest manufacturing data since August 2024. China’s financial markets will be closed for the weeklong Lunar New Year celebration, which will last through next Wednesday.
Last Friday, Baker Hughes weekly oil and gas rig count showed a decline of 4 rigs, bringing total U.S. rigs to 576. This is the lowest level in 4 years and down 7% year-over-year.
Price Thoughts – With crude markets rebounding near its 200 day moving average yesterday, prices came down today after both the EIA and API weekly reports showed U.S. inventory builds following nine straight weeks of draws, with small draws from the Cushing hub. The reports pushed us to new multi-week lows. Tomorrow should be important to gauge whether we begin to move back to bear market territory if the march contracts trade below the 200 day moving average near $72 and change, in my opinion. Markets across the board will be waiting to see if Trump’s sweeping tariffs are put on this weekend after the February 1st deadline. I think if we see the tariffs placed on Canada specifically, oil and energy prices will shoot up Sunday night / Monday morning. Until then, I expect markets to be choppy for the rest of the week. As expected, the Fed left rates unchanged. To the upside there’s resistance near the upper $79.50 region, beyond that there’s a chance, in my opinion, we could make a run towards the upper resistance point of ~$85, but a round figure like $80 could be enough of mental resistance of its own. To the downside we have support near the 200 day MA, $70 offers further support and below that $65 is a major support figure.
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Jim Rinaudo
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