On Tuesday (November 14th), oil prices rose and fell, taking back early gains due to signs of easing tensions in the Middle East and uncertainty in US oil inventories. Previously, due to weaker US CPI data than market expectations, the US dollar index plummeted to a low of more than two months, and the International Energy Agency (IEA) raised crude oil demand expectations, causing oil prices to hit a one week high.
US President Biden has stated that he is conducting daily discussions to ensure the release of hostages held by Hamas armed groups and believes that this will happen.
Oil traders turned bearish, with Monday's gains mainly due to the bullish outlook of OPEC+'s monthly report. However, crude oil still needs more room for growth to continue its recovery, requiring a large amount of catalyst. It is expected that OPEC+will hold a meeting at the end of November to release its forecast for the first half of 2024, and there may be further supply cuts in the future.
WTI December crude oil futures closed flat on Tuesday at $78.26 per barrel.
Brent crude oil futures fell 0.05 US dollars per barrel to 82.47 US dollars per barrel, lower than the settlement price of 84.58 US dollars per barrel on October 6, the day before Hamas attacked Israel. In the following weeks, the Brent crude oil futures price reached as high as 93.79 US dollars per barrel on October 20th.
Market News Analysis
The gradually bullish sentiment that enveloped the market in the third quarter has disappeared in October and November. Price Futures Group analyst Phil Flynn said, 'The war premium is disappearing because supply in the Middle East seems more likely to not be disrupted.'.
In early trading, the International Energy Agency (IEA) raised its demand growth forecast, and data showed that inflation in the world's largest economy slowed down, the US dollar fell, and both crude oil benchmarks rose by more than $1 per barrel.
Flynn said that crude oil prices also gave up early gains on Tuesday due to market uncertainty about what the US oil storage report will show.
According to data from the US Energy Information Administration (EIA), API produced 152000 barrels of crude oil per day in the week ending November 10th. The monthly report shows that the oil market will experience a supply shortage by the end of the year, and there may be an oversupply in early 2024.
Before Saudi Arabia and its OPEC partners deepened production cuts starting in early July, it was only slightly above the recent low of 282 million barrels at the end of June.
Although almost all major economies are expected to experience a slowdown in economic growth, the International Energy Agency has raised its oil demand growth forecast for this year and the next two years. A day ago, the Organization of Petroleum Exporting Countries (OPEC) raised its forecast for global oil demand growth in 2023 and maintained a relatively high forecast for 2024.
The International Energy Agency (IEA) raised its global oil demand growth forecast for 2023 and 2024 to 930000 barrels per day (previously 880000 barrels per day) in its monthly oil market report released on Tuesday; Raise the global oil demand growth forecast for 2023 to 2.4 million barrels per day (previously 2.3 trillion barrels per day); The reduction in production by Saudi Arabia and Russia will result in a serious deficit in the oil market by the end of the year; As the growth of oil demand slows down, the market may turn into surplus in early 2024; In September, China's oil demand rose to a record high of 17.1 million barrels per day; The war between Israel and Hamas did not have a significant impact on oil supply; In October, Russia's oil exports decreased by 70000 barrels per day to 7.5 barrels per day.
Due to the reduced cost of gasoline for Americans, consumer prices in the United States did not change in October, and the annual increase in potential inflation was the smallest in two years.
Traders are betting that the Federal Reserve may start cutting interest rates in May, which could boost economic activity and oil demand.
The expectation that the Federal Reserve may lower interest rates next spring has led to the US dollar falling to a two-and-a-half month low against a basket of other currencies. A weak US dollar can boost oil demand by making crude oil prices cheaper for buyers using other currencies.
Carley Garner, co founder of DeCarley Trading Brokerage, stated that her pessimistic outlook for oil is due to a significant drop of over 17% in prices from nearly a year high in September. Garner said she expects oil prices to drop to $70 per barrel. She said, "We are in a situation where technology truly allows US shale producers to increase production. Although the number of wells drilled is much lower than most people's expectations, they are producing more oil than at any time in US history." She said, "Based on the market's perspective and the trend of oil prices, I may turn bullish from the $70 per barrel level
Investors continued to sell oil futures and options last week as market sentiment became the most pessimistic since mid year, after Saudi Arabia and OPEC? The partner withdrew additional crude oil from the market.
During the seven days ending November 7th, hedge funds and other fund managers sold the equivalent of 57 million barrels of crude oil in six of the most important futures and options contracts.
Fund managers have become sellers in five of the past six weeks, and their combined positions have decreased by a total of 331 million barrels since September 19th.
Continuing the pattern of previous weeks, last week's fund sales were concentrated on crude oil (-52 million barrels), with NYMEX and ICE WTI (-28 million barrels) and Brent crude oil (-24 million barrels) selling roughly the same amount.
WTI's positions have become particularly bearish: NYMEX and ICE WTI's positions have decreased from 286 million barrels (60th percentile) at the end of September to only 90 million barrels (4th percentile).
The concentration of short positions increases the probability of a significant price reversal when funds achieve profits. Does this also increase OPEC? There is a risk of further action pushing up oil prices and/or squeezing Cushing's deliverable inventory again. Most traders have already predicted that Saudi Arabia, Russia, and OPEC? The allies will extend the current production reduction from the end of December to at least the end of March.
There will be more news about US crude oil inventories later today, and investors need to pay more attention.
Focus on financial data and events on Wednesday (Beijing time)
① 10:00 China's annual rate of total retail sales of consumer goods in October, and China's annual rate of industrial added value above designated size in October
② 14:30 France's third quarter ILO unemployment rate
③ 15:00 UK October CPI Monthly Rate, UK October Retail Price Index Monthly Rate
④ 15:45 French October CPI Monthly Rate
⑤ 18:00 Eurozone September Quarterly Adjusted Trade Account, Eurozone September Industrial Output Monthly Rate
⑥ 21:30 Canada September wholesale sales monthly rate, US October retail sales monthly rate, US October PPI annual and monthly rate, US November New York Fed manufacturing index
⑦ 23:00 US September Commercial Inventory Monthly Rate
⑧ 23:30 EIA crude oil inventory for the week from the United States to November 10, Cushing crude oil inventory for the week from the United States to November 10, and Strategic Petroleum Reserve inventory for the week from the United States to November 10
