Oil prices increased for the second straight session on Thursday

Recap: The prospect of increased output cuts by OPEC and its allies, along with the unexpected decline in U.S. crude oil inventories pushed oil prices higher for the second straight session on Thursday. December Brent was up 73 cents at $61.90 a barrel by 1:30 p.m. ET, while WTI rose 54 cents to $56.51. Gains were pared with December Brent settling at $61.27 a barrel, up 50 cents, or 0.82%, while December WTI added 26 cents, or 0.46%, to settle at $56.23 a barrel. Although total petroleum stocks in the U.S. declined by 21 million barrels in the last three weeks, traders will most likely continue to wrestle with the outlook for crude demand amid a slack in the global economy, which would have a limiting effect on gains for oil.  November RBOB closed up 0.7% to end at $1.6632 a gallon and November heating oil tacked on 1.1% to close at $1.9863 a gallon.

Technical Analysis: WTI continued to pull away from key technical numbers and in fact bounced off of $55.42, the 38% retracement provided by the September high of $62.75 and the October low of $50.89. With the December contract settling above $55.00, we would look for a push toward $56.82, the 50% retracement of the aforementioned range. Above this level, there is resistance set at $57.05. to the downside, support is set at $55.00 and $54.27.

Fundamental News: Genscape reported that crude oil stocks held in Cushing, Oklahoma in the week ending Tuesday, October 22nd increased by 1,642,444 barrels on the week and by 831,131 barrels from Friday, October 18th to 46,496,622 barrels. 

Equinor stated that Norway’s Johan Sverdrup oil field has reached a production level of 200,000 bpd less than three weeks after starting operations.  It reaffirmed that the field should reach its first-phase “plateau” production target of 440,000 bpd next summer.  The field is currently producing from five wells, and all eight of the wells drilled ahead of the startup should be producing by the end of November.  The field is estimated to hold 2.7 billion barrels of recoverable reserves.  Meanwhile, Equinor’s oil production in Norway and internationally in the third quarter, with Norwegian output falling 9% on a year earlier at 497,000 bpd and overseas output falling 2% at 448,000 bpd. 

The Forties oil and gas pipeline system will be shut on Thursday due to a loss of grid power. 

The Chief Executive of Russia’s Rosneft, Igor Sechin, said the September attacks on Saudi oil assets which temporarily shut down around half of the country’s oil output has created grounds to rethink Saudi Arabia’s role as a reliable oil supplier.  He said the sudden loss of output “gives grounds to rethink Saudi Arabia’s role as an undoubtedly reliable oil supplier.”

According to preliminary official figures, PDVSA has seen its crude production fell to an average 672,000 bpd so far in October, down 55.5% from a 1.51 million bpd average in January.  PDVSA is falling short of its 1.9 million bpd production goal for 2019 due to US sanctions and a steady deterioration in PDVSA infrastructure. 

Crude oil flows on two pipelines from the Permian Basin to the Houston area have slowed this month as differentials narrowed and volumes to another US Gulf Coast hub increased.  Crude volumes on Magellan Midstream Partners LP’s Longhorn pipeline, which runs from the Permian to the Houston area, were about 208,000 bpd last week, down from 287,000 bpd in the week ending October 4th.  Enterprise Products Partners LP’s Midland-to-Sealy pipeline had flows of about 420,000 bpd last week, down from about 601,000 bpd in early October.  Cheap tariffs on EPIC Midstream and Plains All American Pipeline’s PAA.N lines from the Permian to Corpus Christi, Texas are helping increase volumes from Houston.  Plains’ Cactus II line has increased its flows almost one-third over September. 

Early Market Call - as of 8:45 AM EDT

WTI - Dec $56.05, down 19 cents

RBOB - Nov $1.6611, down 13 points

HO - Nov $1.9739, down 1.22 cents