The December WTI (CLZ24) trading session settled at 70.53 (+1.92) [+2.80%], had a high of 70.81, a low of 68.30. Cash price is at 68.61 (+1.44), while open interest for CLZ24 is at 345,864. CLZ settled above its 5 day (69.11), below its 20 day (71.29), below its 50 day (70.27), below its100 day (73.16) and below its 200 day (74.30) moving-averages. The COT report (Futures and Options Summary) 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). 

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Crude oil markets rocketed higher after Axios broke a story late in the trading session that Israeli intelligence suggests Iran is preparing to launch a new round of missile and drone attacks. Two Israeli sources told Axios that the attack could happen “in the coming days, possibly before the US presidential election”. The story coincides with the CNN report from yesterday where a “high-ranking Iranian source” told CNN that Iran was planning a “definitive and painful” retaliation. This newest “tit for tat” comes after Israel took out defensive military equipment last weekend that protected Iran’s energy facilities. 

Bullish news out of China for crude oil today, as 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. A sign that may signal to Chinese Officials that their stimulus packages have had a positive impact on their economy. 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 1.59% higher today. 

Reuters, citing unnamed sources, broke a story yesterday 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. By the end of next year OPEC+ plans to bring back 2.2 million barrels per day of production. OPEC+ is currently withholding 5.86 million barrels per day (roughly 5.7% of global crude demand).

The 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.  API’s weekly data showed a decline in crude stocks by -573,000 barrels. The U.S. Energy Department recently announced plans for adding 3 million barrels to the Strategic Petroleum Reserve through May of next year. Yesterday’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.  

Price Thoughts - Looking at charts here, I see our current $67 support line holding on strong, and the next resistance to test is around ~$72 for the upside. For now OPEC+ is sticking with their planned output increases starting in December, which is quite consequential and I believe not fully priced into futures still. Add to that, if Donald Trump is elected to President next 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. And 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 tensions, 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 low to middle $70’s range, for long as there’s no black swan events.

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Jim Rinaudo

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