December WTI (CLZ24) and Oil Market Updates

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The December WTI (CLZ24) trading session settled at 68.61 (+1.40) [+2.08%], with a high of 69.17 and a low of 67.28. Cash price is at 67.17 (-0.18), and open interest for CLZ24 is at 354,114. CLZ settled below its 5-day (69.10), 20-day (71.44), 50-day (70.28), 100-day (73.21), and 200-day (74.30) moving averages.
The COT report as of 10/22 showed commercials with a net short position of -229,875 (a decrease in short positions by +16,937 compared to last week) to non-commercials who are net long +203,990 (a decrease in long positions by -9,230 compared to last week).

Today’s EIA weekly petroleum status report showed crude inventories having a draw of -515,000 barrels, against a +1.37m/b build forecast. U.S. crude imports averaged 6 million barrels per day last week, a decrease of -456,000 barrels over the prior week. U.S. crude refineries were operating at 89.1% capacity. U.S. crude oil inventories are roughly ~4% below their five-year seasonal average. The Cushing hub saw a +681,000 barrel build. Tuesday’s API report showed a decline in crude stocks by 573,000 barrels. Yesterday the U.S. Energy Department announced plans for adding 3 million barrels to the Strategic Petroleum Reserve through May of next year.

Reuters reported that OPEC+ could delay their plans to increase oil production by 180,000 barrels per day starting in December. OPEC+ is scheduled to have their next meeting on December 1st.

Reuters reported yesterday that China is considering the issuance of roughly $1.4 trillion in extra debt over the next few years. China’s parliament is set to hold a major policy meeting the first week of November, conveniently timed up with the U.S. election. Sources told Reuters they expect further stimulus packages to be added by China if Donald Trump is elected to President next week, citing trade-war and tariff concerns. The Shanghai CSI 300 Index closed 0.90% lower today.

Axios reported that Senior White House Officials will be traveling to Israel tomorrow and meeting with Prime Minister Netanyahu to help push for a ceasefire between Hezbollah and Israel. According to Reuters Israel is considering ending its conflict in Lebanon against Hezbollah with a 60-day suspension of military activity to facilitate a lasting peace deal. Crude prices cratered Monday over $4 after Israel’s attack on Iranian missile sites avoided crude and nuclear facilities, which was viewed as more restrained than many analysts and traders had anticipated. The limited strike has, for now, erased the war premium that had been factored into the market, dropping from its peak a few weeks ago and offsetting the roughly 4% gains in the oil benchmarks from last week.

The market is currently experiencing a shift back to conditions of lower demand and higher output. This has been particularly evident with the largest single day decline for WTI crude oil prices in two years occurring on Monday.

Price Thoughts: If the market can settle above the crucial support line of $67 today, we may witness a short-term price recovery. Regardless, volatility is expected to continue until the U.S. election results are finalized. Analyzing the charts, the next support line is identified at approximately $65.20, below our current $67 support line. A break below this level could push prices down to $60, while resistance is seen around $72, with a potential to push prices up to $77 if broken.

OPEC+ is committed to their planned output increases starting in December, which is a significant development that may not be fully priced into futures yet. Additionally, if Donald Trump is re-elected as President, he is expected to increase American energy output capacity significantly, fulfilling his promise to ‘Drill baby, drill’. This could lead to an interesting market share conflict with OPEC+ nations, but that is a story for another time.

China’s economic stimulus decisions will also play a crucial role in determining crude oil prices, both in the short and long term. With factors such as a stronger dollar, potential trade wars, increasing supply, slowing economies, and a lack of global demand influencing price sentiment, it is predicted that crude oil prices in 2025 will not average in the $85-$95 range. Instead, prices are expected to trade in the high $60s to $75 range, assuming no unforeseen ‘black swan’ events occur.

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