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Crude oil trading reminder: The situation in the Middle East eases VS two major gains, oil prices rise and fall
Oil prices retreated from highs on Tuesday (November 14) due to signs that tensions in the Middle East may ease and uncertainty about U.S. oil inventories. Oil prices gave up early gains after the U.S. CPI data was weaker than market expectations, causing the U.S. dollar index to plummet. to a more than two-month low, and the International Energy Agency (IEA) raised its crude oil demand forecast, and oil prices once refreshed a one-week high.
U.S. President Joe Biden said he is having discussions every day to secure the release of hostages held by the Hamas armed group and believes it will happen.
Oil traders turned bearish, with Monday’s gains mainly due to the bullish outlook for OPEC+’s monthly report, but crude oil still needs more room to rise to continue its recovery, requiring a large number of catalysts, and it is not expected until the end of November that OPEC+ will meet to release the 2024 oil price. Half-year forecast suggests further supply cuts are likely in the future.
WTI December crude oil futures ended flat on Tuesday, closing at $78.26 per barrel.
(U.S. West Texas Intermediate (WTI) crude oil futures chart)
Brent crude oil futures fell $0.05/barrel to $82.47/barrel, lower than the settlement price of $84.58/barrel on October 6, the day before Hamas attacked Israel. In the following weeks, the price of Brent crude oil futures on October 20 was as high as $93.79 per barrel.
[Market News Analysis]
The gradually bullish sentiment that gripped the market in the third quarter has dissipated in October and November. “The war premium is disappearing as it looks more likely that supplies from the Middle East will not be disrupted,” said Phil Flynn, an analyst at Price Futures Group.
In early trading, the U.S. dollar fell, with both crude oil benchmarks rising by more than $1/barrel, after the International Energy Agency (IEA) raised its demand growth forecast and data showed slowing inflation in the world‘s largest economy.
Flynn said crude oil prices also gave up early gains on Tuesday as the market was uncertain about what the U.S. oil storage report would show.
According to data from the U.S. Energy Information Administration (EIA), API crude oil production in the United States in the week to November 10 was 152,000 barrels per day. The monthly report showed that the oil market will experience a supply shortage by the end of the year and a possible oversupply in early 2024.
That was just above the recent low of 282 million barrels in late June before Saudi Arabia and its OPEC partners deepened production cuts starting in early July.
Although economic growth is expected to slow in almost all major economies, the International Energy Agency has upgraded its oil demand growth forecast for this year and next. A day earlier, the Organization of the Petroleum Exporting Countries (OPEC) raised its forecast for global oil demand growth in 2023 and maintained a relatively high forecast for 2024.
In its monthly oil market report released on Tuesday, the International Energy Agency (IEA) raised its forecast for global oil demand growth in 2023 and 2024, raising the forecast for global oil demand growth in 2024 to 930,000 barrels per day (previously 880,000 barrels per day). day); raises global oil demand growth forecast to 2.4 million barrels per day in 2023 (previously 2.3 million barrels per day); production cuts by Saudi Arabia and Russia will keep the oil market in serious deficit until the end of the year; as oil demand growth Slow down, the market may turn into a surplus in early 2024; China’s oil demand rose to a record 17.1 million barrels per day in September; the war between Israel and Hamas did not have a major impact on oil supply; Russian oil exports in October It decreased by 70,000 barrels per day to 7.5 barrels per day.
U.S. consumer prices were unchanged in October as Americans paid less for gasoline and the annual increase in underlying inflation was the smallest in two years.
Traders are betting that the U.S. Federal Reserve may begin cutting interest rates in May, which could boost economic activity and oil demand.
Expectations that the Federal Reserve may cut interest rates next spring sent the dollar to a 2-1/2-month low against a basket of other currencies. A weaker dollar can boost oil demand by making crude cheaper for buyers using other currencies.
Carley Garner, co-founder of brokerage DeCarley Trading, said her pessimistic outlook for oil comes as prices have fallen more than 17% from their nearly one-year high in September. Garner said she expects oil prices to fall to $70 a barrel. “We are in a situation where technology is really allowing U.S. shale producers to ramp up production,” she said. “Although the number of rigs being drilled is far lower than most people expected, they are producing more than at any time in U.S. history.” oil.” “Depending on how the market sees it, depending on where oil prices go, I might turn bullish from the $70/barrel level,” she said.
Investors continued to sell off oil futures and options last week as sentiment turned the most pessimistic since mid-year after Saudi Arabia and its OPEC partners withdrew additional crude from the market.
In the seven days ended Nov. 7, hedge funds and other money managers sold the equivalent of 57 million barrels of crude oil across the six most important futures and options contracts.
Fund managers have been sellers in five of the last six weeks, reducing their combined positions by a total of 331 million barrels since Sept. 19.
Continuing a pattern from previous weeks, fund sales last week were concentrated in crude oil (-52 million barrels), with roughly equal volumes of NYMEX and ICE WTI (-28 million barrels) and Brent (-24 million barrels).
Positioning in WTI has become particularly bearish: NYMEX and ICE WTI positions fell from 286 million barrels (60th percentile) at the end of September to just 90 million barrels (4th percentile).
The concentration of short positions increases the probability of a sharp price reversal when funds realize profits. It also increases the risk of OPEC taking further action to push oil prices higher and/or squeeze deliverable inventories at Cushing again. Most traders already expect Saudi Arabia, Russia and their OPEC allies to extend current production cuts from the end of December to at least the end of March.
There will be more news about U.S. crude oil inventories later today, and investors need to pay more attention.
[Wednesday focuses on financial data and events (Beijing time)]
①10:00 China’s October annual rate of total retail sales of consumer goods, China’s October annual rate of industrial added value above designated size
②14:30 France’s ILO unemployment rate in the third quarter
③15:00 UK October CPI monthly rate, UK October retail price index monthly rate
④15:45 French CPI monthly rate in October
⑤18:00 Eurozone’s seasonally adjusted trade balance in September, Eurozone’s monthly industrial output rate in September
⑥21:30 Canadian wholesale sales monthly rate in September, U.S. retail sales monthly rate in October, U.S. PPI annual rate and monthly rate, U.S. New York Fed manufacturing index in November
⑦23:00 Monthly rate of U.S. commercial inventories in September
⑧23:30 EIA crude oil inventories in the United States for the week until November 10, EIA Cushing crude oil inventories in the United States for the week until November 10, EIA strategic petroleum reserve inventories in the United States for the week until November 10.