The Nov WTI (CLX24) trading session settled at 70.58 (-3.25) [-4.40%], had a high of 72.12, a low of 69.71. Cash price is at 73.85 (-1.66), while open interest for CLX24 is at 158,279. CLX settled below its 5 day (73.89), below its 20 day (71.79), below its 50 day (71.83)((broke through its 20 and 50 day MA to the downside today)), and below its 200 day (74.93) moving-averages. The COT report (Futures and Options Summary) as of 10/8 showed commercials with a net short position of -252,853 (a increase in short positions by -36,955 compared to last week) to non-commercials who are net long 226,214 (a increase in long positions by +28,143 compared to last week). The December Open Interest is 285,211.

Oil prices were slammed after The Washington Post reported that Israel informed U.S. officials they would be targeting Iranian military facilities rather than nuclear or energy sites. At this point the entire war-premium has been wiped out over the last week. Adding fuel to the fire the IEA lowered its global oil demand growth forecast for this year, attributing the adjustment to less demand from China. The IEA now projects an increase in world oil demand of 860,000 b\d, which is 40,000 b\d less than the IEA’s earlier estimate. Adding to the surplus in crude oil the IEA sees countries outside of OPEC+ increasing their output by ~1.5 million b\d next year. 

On Saturday China’s Finance Minister Zheng Shanjie did not disclose any new incentives that would increase their oil consumption. Although he did leave the door open for more stimulus, by not announcing any specific new measures during that briefing it was not what bullish oil traders were hoping for. OPEC for the third consecutive month cut its global oil demand growth figure for 2024, and lowered its forecast for 2025 as well. In the first three quarters of 2024, China's crude imports averaged 10.99 million b\d, a decrease of 2.8% compared to 11.34 million b\d during the same period in 2023. OPEC’s economic growth forecast for China remained unchanged, however China’s oil demand for next year was lowered from 650,000b\d to 580,000b\d. In a recent economic update the World Bank revised China’s growth rate to 4.3% for next year, which is lower than the 4.8% projected growth rate for this current year. The CSI 300 Index was down 2.66% today.

On Monday OPEC reported that their oil production was lower for the month of September, down to 604,00b\d, mainly driven by the production standstill in Libya (which is back to pre-standoff production levels again) and lower output from Iraq (who had previously been reprimanded by other OPEC nations for going over their output quota).

Settling below $72 today signals to me we are heading into the mid $60’s - lower $70’s range we were in a month ago, with a new floor to break through around the $67 mark . I see support levels around $71.50-72.50 and resistance around $77 to the upside for the bulls. The market should continue being volatile and reactionary. In my own view I firmly believe there’s downward pressure facing crude prices, with the largest thing weighing the crude markets down is lower global demand (specifically China) and the cooling of economies worldwide.

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Jim Rinaudo

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