Recap: The oil market on Thursday continued to trade lower and breached the $50 level for the first time since October 2017. The market posted a low of $49.41 as the market remained pressured by the larger than expected build in crude stocks and Saudi Arabia’s insistence that it will not cut its output on its own to stabilize the market. However, the crude market bounced off its low and traded mostly sideways before it found some support and rallied towards Wednesday’s high as it posted a high of $52.20 in afternoon trading. Prices rebounded after sources stated that Russia would consider cutting production alongside Saudi Arabia and other OPEC members. The WTI market later erased some of its gains ahead of the close and settled up $1.16 at $51.45. January Brent settled up 75 cents at $59.51. Meanwhile, the product markets ended in positive territory, with the heating oil market settling up 52 points at $1.8436 and the RBOB market settling up 5.68 cents at $1.4747.
Technical Analysis: The market is technically seen trading lower as the 50 and 200-day moving averages crossed during Thursday's session. The market which breached the $50 level is seen finding support at its low of $49.41 followed by $47.96 as previously mentioned. Meanwhile, resistance is seen at its highs of $52.20, 52.56 followed by $54.82 and $55.86.
Fundamental News: Genscape reported that crude oil stocks held in Cushing, Oklahoma in the week ending Tuesday, November 27th increased by 772,050 barrels on the week and by 771,924 barrels from Friday, November 23rd to 39,350,008 barrels.
Russia’s Energy Minister, Alexander Novak, said Russia expects OPEC and non-OPEC oil producers at the ministerial meeting on December 6th to reach an agreement that is beneficial for the oil market. He said the energy ministry is still considering a proposal on whether to cut oil production.
According to Bloomberg, Libya is producing 1.266 million bpd. It was pumping 1.25 million bpd as of October 30th. The Sharara field, Libya’s largest field, is currently producing 310,000 bpd.
The Environmental Protection Agency lifted its annual blending mandate for advanced biofuels by 15% for 2019, while keeping the requirement for conventional biofuels like corn-based ethanol steady. The mandate includes 4.92 billion gallons for advanced biofuels, a figure that is up from the EPA’s initial proposal in June of 4.88 billion and above the 4.29 billion that had been set to 2018. The requirement for conventional biofuels, meanwhile, remains at 15 billion gallons for 2019, on par with 2018, and the same as proposed by the agency in June.
JPMorgan equity analysts said OPEC will agree on a “weak” deal when it meets in Vienna on December 6th. They said Russia is unlikely to meaningfully cut its output. A return to full compliance with previously agreed output cuts would imply a net cut of 830,000 bpd to 32.5 million bpd, which would fall short of expectations and prove to be short-lived.
Macquarie analysts stated that oil prices are seen supported in the short term by an expected OPEC production cut of at least 1 million bpd and colder weather in the northern hemisphere increasing demand.
HSBC analysts stated that if oil prices do not improve, US supply growth could slow “considerably.”
Early Market Call – as of 8:50 AM EDT
WTI – Jan $50.60, down 84 cents
RBOB – Dec $1.4308, down 2.16 cents
HO – Dec $1.8129, down 3.28 cents
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