The February WTI (CLG25) trading session settled at 73.32 (-0.93) [-1.25%], a high of 75.29, a low of 73.16. Cash price is at 74.29 (+0.69), while open interest for CLG25 is at 270,820. CLG25 settled below its 5 day (73.65), above its 20 day (70.90), above its 50 day (69.55), above its 100 day (69.67), above its 200 day (72.64) and below its year-to date (73.65) moving averages. The COT report (Futures and Options Summary) as of 12/31 showed commercials with a net short position of -275,068 (an increase in short positions by -3,317 from the previous week) and non-commercials who are net long +273,330 (an increase in long positions by +7,012 from the previous week).
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Today’s EIA report showed U.S. refineries averaging 16.9 million barrels per day, operating at 93.3% capacity. U.S commercial oil inventories fell by 1 million barrels, total inventories stand at 414.6 million barrels, which is about 6% below the seasonal average. U.S. oil imports averaged 6.4 million barrels per day, a decrease of 497,000 barrels from the previous week’s report. Yesterday’s API data showed crude oil inventories falling by 4.002 million barrels, with a 3.115 million barrel draw from the Cushing hub.
According to a Reuters survey, oil production from the Organization of the Petroleum Exporting Countries (OPEC) declined in December following two consecutive months of growth. In December, Russia’s oil production averaged 8.971 million barrels per day, falling short of the country’s target, according to the energy ministry, as reported by Bloomberg.
Ports in China’s Shandong province have been instructed to prevent Iranian oil tankers from unloading oil at their terminals. Sources told Reuters that independent oil refiners in China have already started refusing services to Iranian oil tankers due to U.S. sanctions. The Shanghai based CSI 300 index closed lower by -0.18%.
The White House announced President Biden will be moving forward with his executive order to permanently ban new offshore oil and gas development in more than 625 million acres of U.S. coastal waters. According to Bloomberg, “Biden’s planned declaration is rooted in a 72-year-old law that gives the White House wide discretion to permanently protect US waters from oil and gas leasing without explicitly empowering presidents to revoke the designations.” In a press conference today incoming President Trump again reiterated his intention to overturn Biden’s last minute ruling, saying “I’m going to have it revoked on day one”. Ultimately, from what I have read, for Trump to revoke Biden’s action it would have to pass through courts. New Manufacturing PMI data showed U.S factory orders fell in November by 0.4%, economists had forecasted a 0.3% drop. The U.S. Dollar Index closed higher by 0.43%.
Meteorologists predict the current arctic blast will leave the Northern Hemisphere “colder than usual” through January 22nd. The coldest temps are forecasted to occur next week, as of today the forecast for February seems to suggest the colder temps will be less intense.
Canada’s Prime Minister Justin Trudeau announced he would be stepping down after Canada held elections to find his replacement, Canada is set to hold a national election before October. On online betting markets, such as Polymarket, Pierre Poilievere, leader of the Conservative Party of Canada, has the highest odds to succeed Mr. Trudeau. Mr. Poilievre has said in past interviews that he would repeal Canada’s carbon tax, roll back red tape affecting the country’s energy policies, and work to open new Canadian oil refineries, nuclear power plants, and natural gas facilities, while also remaining committed to green energy initiatives.
U.S. dockworker union leaders and the U.S. Maritime Alliance resumed negotiations. The previous dockworkers’ strike was halted in October after the parties reached a tentative deal. The deadline for a new agreement is January 15th. Roughly 47,000 dockworkers on the East and Gulf Coast will be affected, and according to data from the American Association of Port Authorities, the affected ports handle about half of America’s container volumes. The world’s second largest container carrier, Maersk, told companies last week to remove cargo from the affected ports before January 15th. Economists estimate that daily lost revenue could range from $1 billion to $5 billion, with the potential for this figure to grow as the strike continues.
After previously being rumored last week, Saudi Aramco has raised its crude oil prices for the Asian market for February by 60 cents per barrel, which is the first increase in three months after selling at a four-year low in December. I believe, as well as many others who follow the crude markets, that this signals Saudi’s optimism that oil demand is picking up.
Tomorrow China will release inflation data and American markets will have shortened trading sessions in observance of former President Carter’s death. On Friday U.S. jobs data is released and the start of Q4 earnings season begins.
Price Thoughts – WTI was unable to stay above $75 after trading into that range overnight before selling off after the open and fresh EIA data with a draw that came in below the forecast. The updated COT report showed money managers raising their long positions for crude oil in the futures and options markets while commercials raised their short positions. Crude oil finally broke out above its 200 day moving average last week, settling firmly higher than its $72.50 resistance it’s traded under the last 3 months. Crude could make a run towards $77 (last time trading at that level was early October for CLG25) or trade back below $72.50 into our previous 3 month range if momentum continues to stall below $75, in my opinion. Rolling from the February contract into March and April is beginning to pick up. Longer term for 2025 I believe we’ll still trade somewhere, on average, between a $10 range of $65-$75 for WTI, so long as current conditions persist.
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Jim Rinaudo
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