Recap: Oil futures, which received an early boost in overnight trading on reports the UK had approved the use of a vaccine for COVID-19, rallied after the EIA reported a second weekly drop in U.S. crude inventories. Traders also placed bets that OPEC+ would extend production cuts into the new year, lending additional support to the market. January WTI rose 73 cents, or 1.6%, to settle at $45.28 a barrel, while Brent for February delivery tacked on 83 cents, or 1.8%, to settle at $48.25 a barrel. January RBOB added 1.6%, to settle at $1.2399 a gallon, while January heating oil rose 1.4% to $1.3662 a gallon.
Technical Analysis: WTI rallied despite the significant builds in both gasoline and distillate inventories. The higher move came on circulating unconfirmed reports that OPEC is making progress in its talks concerning production cuts. Should such an agreement emerge, oil prices may continue their upside momentum. It appears buyers are out there down around the $44 level, as this market continues to bounce off of this level. Based upon a spot continuation chart for WTI, a bull flag formation has formed. This short term pattern, which slopes against the prevailing trend, is considered a period of consolidation before the uptrend continues. A break, followed by a settlement above this pattern should see prices move higher. Resistance is set at $45.58 and above that at $46.30. A push above this level could take WTI toward $50. To the downside, support rests at $44.21 and below that at $43.80. We would continue to monitor the coronavirus and its impact on demand.
Fundamental News: The EIA said U.S. oil production increased in the week ending November 27th to the highest level since May. U.S. oil production increased by 100,000 bpd to 11.1 million bpd. Meanwhile, U.S. gasoline demand fell to 7.97 million bpd, the lowest since June.
Russian oil and gas condensate output increased to 10 million bpd in November from 9.98 million bpd in October.
IIR Energy reported that U.S. oil refiners are expected to shut in 3.58 million bpd of capacity in the week ending December 4th, increasing available refining capacity by about 136,000 bpd from the previous week. Offline capacity is expected to ease to 3.57 million bpd in the week ending December 11th.
Bloomberg reported that Mexico will take a $2.5 billion payout from its sovereign oil hedge this year.
According to PDVSA data and Refinitiv Eikon, Venezuela’s oil exports almost doubled in November from the previous month as new customers linked to a Russian trading firm increased purchases from PDVSA. A total of 24 cargoes left Venezuela in November carrying 639,000 bpd of crude and refined products, an increase from the 360,000 bpd exported in October.
U.S. Treasury Secretary, Steven Mnuchin, said President Donald Trump will sign coronavirus relief legislation proposed by Republican Senate Majority Leader, Mitch McConnell, should the proposed package pass the U.S. Congress.
According to an economic forecast released by S&P Global, the U.S. economy will fall into a double-dip recession and take nearly a year longer to return to pre-pandemic growth if Congress fails to pass a new coronavirus relief bill.
On Wednesday, Britain approved Pfizer's COVID-19 vaccine, ahead of the United States and Europe to become the West's first country to formally endorse a vaccine it said should reach the most vulnerable people early next week.
The World Health Organization said it had received data from Pfizer and BioNTech on the COVID-19 vaccine and was reviewing it for "possible listing for emergency use".
Early Market Call – as of 8:45 AM EDT
WTI – Jan $45.09 Down 0.19
RBOB – Jan $1.2386 Down 0.012
HO – Jan $1.3626 Down 0.036
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