The February WTI (CLG25) trading session settled at 73.13 (+1.41) [+1.97%], a high of 73.73, a low of 71.79. Cash price is at 71.74 (+0.71), while open interest for CLG25 is at 340,630. CLG25 settled above its 5 day (71.23), above its 20 day (69.71), above its 50 day (69.28), above its 100 day (69.69) and above its 200 day (72.68) moving averages. The COT report (Futures and Options Summary) as of 12/24 showed commercials with a net short position of -271,751 (an increase in short positions by -15,345 from the previous week) and non-commercials who are net long +266,318 (an increase in long positions by +18,085 from the previous week).

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Energy Information Administration (EIA) data this morning showed U.S. energy stocks decreasing for the sixth consecutive week. Crude Oil inventories decreased by 1.2 million barrels, to a total of 415.6mb, which is about 5% lower than the five-year seasonal average. Oil imports rose by 455,000 barrels per day, to a total of 6.9 million barrels per day. U.S. refineries operated at 92.7% of their capacity, with an increase in output of 41,000 barrels per day over the previous week’s data, in total averaging 16.9 million barrels per day. The EIA said U.S. crude oil production hit a record high in October, producing 13.46 million barrels per day. While Oil demand hit its highest mark since 2020 at 21.01 million barrels per day. This week's API data showed U.S. inventories falling by 1.4 million barrels last week. All in all, oil prices fell by ~3% in 2024. 

Bloomberg reported President Biden is preparing to issue an executive order which would permanently ban new offshore oil and gas development in some U.S. coastal waters before his term ends on the 20th. According to Bloomberg, “Biden’s planned declaration is rooted in a 72-year-old law that gives the White House wide discretion to permanently protect US waters from oil and gas leasing without explicitly empowering presidents to revoke the designations.”. Of course if this is to come to fruition this would throw a monkey wrench at President-elect Trump’s plan to “drill baby drill”, in my opinion. U.S. dockworker union leaders and the U.S. Maritime Alliance will resume negotiations next Tuesday. The previous dockworkers’ strike was halted in October after the parties reached a tentative deal. The deadline for a new agreement is January 15th. Roughly 45,000 dockworkers on the East and Gulf Coast will be affected, and according to data from the American Association of Port Authorities, the affected ports handle about half of America’s container volumes. From what I’ve read, most “in the know" believe there will be a strike before an agreement is reached between the two parties.  Tomorrow U.S. ISM manufacturing data will be released, next Friday December’s job report is out and Q4 2024 earnings season will begin. On the year the S&P 500 finished up +23%, the Dow nearly +13% and the Nasdaq almost +29%. The U.S. Dollar Index closed higher by 0.72%.

China’s President Xi spoke this morning promoting growth and optimism for China’s economy and global positioning. This comes after a Caixin/S&P Global survey showed the country's factory activity ticked a smidge higher in December, but did not beat economists' forecasts. The Caixin survey resembled China’s official National Bureau of Statistics figure released on Tuesday. However, China's non-manufacturing PMI rose by 2.2% in December. A Reuters survey of six sources at Asian refineries said Saudi Arabia could increase oil prices for the Asian market in February for the first time in three months, this comes after Arab Light prices for Asian buyers was at a four-year low in December. The rumor among said Reuters sources is that Arab Light prices may rise by 20 to 50 cents a barrel. Chinese stocks settled deeply in the red today, with the Shanghai based CSI 300 Index closing lower by 2.91%

After one of the warmest Decembers on record for the United States, a polar vortex is forecasted to blow through much of the Midwest, Southern and Northeastern states, bringing potentially the coldest January temps since 2011. AccuWeather meteorologists predict a sustained cold front could potentially last all the way till the beginning of spring.

Over the New Year holiday Russia’s Gazprom pipeline that runs through Ukraine was halted after their five-year joint transit agreement expired at year's end. EU gas prices have risen to their highest levels since October of 2023. Like North America, Europe is expected to face this arctic blast through February.

Price Thoughts - Crude oil finally broke out above its 200 day moving average, settling firmly higher than its $72.50 resistance and going even further by settling into $73 territory. The hazy and thinner-volume two week holiday period between Christmas and New Years ends tomorrow. What happens next week will dictate whether we begin trading into an extended bull run towards $77 (last time trading at that level was early October for CLG25) or trade back below $72.50 into our previous 3 month range. Short-term I’m still leaning bullish with the current U.S. supply and demand situation, the northern hemisphere cold blast and potentially continued Chinese stimulus announcements and crude oil buying. Longer term for 2025 I believe we’ll still trade somewhere, on average, between a $10 range of $65-$75 for WTI, so long as current conditions persist. 

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Jim Rinaudo

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