Crude Oil WTI Futures Market News and Commentary
Nov WTI crude oil (CLX19) on Friday closed up by +1.15 (+2.15%), Dec Brent crude oil (CBZ19) closed up by +1.41 (+2.39%), and Nov RBOB gasoline (RBX19) closed up +0.0155 (+0.95%). The energy complex rallied Friday and posted 1-1/2 week highs on a weaker dollar, trade optimism, and renewed geopolitical risks in the Middle East. The dollar index slumped to a 3-week low Friday, which benefits most commodities priced in dollars. Meanwhile, growing optimism that the U.S. and China can negotiate a trade truce boosted economic growth and energy demand prospects. President Trump said Friday afternoon that both sides agreed to the outlines of a phase-one trade deal that could be signed as early as next month. Another bullish factor for crude prices was renewed geopolitical risks in the Middle East after Iran said Friday one of its oil tankers was hit by missiles in the Red Sea, which boosts tensions in the Middle East that could threaten global crude supplies. Crude prices extended their gains after CNN reported Friday morning that the U.S. will send 1,800 troops to help defend Saudi Arabia. Friday's U.S. economic data was positive for economic growth prospects and energy demand after the University of Michigan's Oct U.S. consumer sentiment index unexpectedly rose +2.8 to 96.0, stronger than expectations of -1.2 to 92.0. A negative for crude was Friday's action by the International Energy Association (IEA) to cut its 2019 global refining estimate by -200,000 bpd to 82.3 million bpd from a prior estimate of 82.5 million bpd. Wednesday’s weekly EIA data showed that U.S. crude oil inventories as of Oct 4 were +1.3% above the seasonal 5-year average, gasoline inventories were +2.3% above the 5-year average, and distillate inventories were -9.5% below the 5-year average. U.S. crude production in the week ended Oct 4 rose +1.6% w/w to a new record high of 12.6 million bpd. Big Picture Crude Oil Market Factors: Bullish factors include (1) the Sep 14 attack on Saudi Arabia's key Abqaiq oil processing facility that temporarily cut Saudi Arabia's oil production by half (i.e., 5 mln bpd of total 9.8 mln bpd production), representing about 5% of total world output, (2) the agreement by OPEC+ to extend its production cut agreement by 9 months until March 2020, (3) reduced OPEC crude output after OPEC Sep crude production fell -1.59 million bpd to 28.32 million bpd, the lowest in 10-1/4 years, (4) heightened Persian Gulf tensions, and (5) the sharp drop in Iranian oil production due to U.S. sanctions and in Venezuela oil production due to U.S. sanctions and its economic crisis. Bearish factors include (1) the recent rally in the dollar index to a 2-year high, (2) global trade tensions that may drag global growth and energy demand lower, (3) the surge in U.S. oil production to a record high of 12.6 million bpd, and (4) ample supplies with U.S. crude oil inventories +1.3% above the seasonal 5-year average.