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Looking to the Futures

The Rise of Crude Oil Prices

Crude oil saw continued gains yesterday morning after the dollar index dropped and global supplies are still in question. Sanctions on Iranian crude oil production show no signs of lifting in the short term. The storage facility Cushing Oklahoma currently has inventories well below average. The Covid-19 pandemic indicates signs of improvement in the United States which could lead to easing of lockdown and travel restrictions. Global economic data from Friday was mixed for Crude oil prices. Data released last week shows an increase in global crude oil stored on oil tankers throughout the world.  

Crude oil supplies remain extremely tight, and it appears OPEC+ will stay course to their plan to gradually increase production. Many OPEC+ countries struggled to meet increased production limits in August and September, contributing to the lack of crude oil supply.

Sanctions continue to limit the crude production out of Iran, as the new government has increased the production of enriched uranium against guidelines of international restrictions. The International Atomic Energy Agency stated that Iran has increased its stockpile of enriched uranium, close to levels needed for weapons-grade.

Crude oil inventories in Cushing, Oklahoma have dropped substantially pushing WTI futures further into backwardation. Last Wednesday's EIA report showed a decreased of -2.32 million bbl to a 3-year low. Cushing supplies are likely near 20%-25% of capacity according to a recent study by JP Morgan Chase.

The EIA report released last Wednesday saw U.S. crude oil inventories -6.1% below the seasonal 5-year average as of October 15th.

Baker Hughes data from last Friday had a decrease of -2 active U.S. oil rigs to 443 in the week ending October 22nd.

Covid-19 cases continue to drop in the United States which could lead to travel, and lockdown restrictions being lifted, increasing domestic energy demand. The 7-day new U.S. Covid infections fell to 3-month low last Thursday at 75,799 cases.

Last week's global economic data was mixed for energy demand with the Eurozone October Markit manufacturing PMI falling -0.1 to 58.5, beating expectations of 57.1. Japan October Jibun Bank services PMI rose +2.9 to 50.7. Negative news included U.S October Markit manufacturing PMI falling -1.5 to 59.2, missing the expected 60.5.

On the bearish side for energy demand and crude oil prices, global crude oil stored on tankers that have been stationary for at least seven days increased +0.6% w/w to 101.46 million bbl in the week ending October 15th.

Technicals:

Looking at the daily chart for the Light Sweet Crude Oil December 2021, CLZ21 contract we can see the steady buying pressure over the past 2 months. The contract has consistently traded above the 50-Day and 200-Day Simple Moving Averages with the 20-Day SMA operating as a support level.

Trading Central’s daily technical analysis has support levels at 83.95 and 83.50 with resistance levels at 85.40 and 86.00. CLZ21 tested the initial resistance level yesterday but traded lower to close below the initial support level.

According to the CFTC Commitment of Traders report released on October 19th, managed money traders have decreased their long position by -3,738 contracts and decreased their short position by -11,064 contracts. Managed money traders are net long 301,474 contracts.

The 14-Day Relative Strength Index 78.59% indicates that the December crude oil contract is moving into overbought territory.

Contract Specs:

Light Sweet Crude Oil December 2021

Trading Calendar:

 

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