Concerns Over Demand in Light of Some Weak Economic Data

Recap:  The oil market on Thursday sold off sharply to its lowest level in four months amid concerns over demand in light of some weak economic data. The oil market, which traded lower on Wednesday on the build in crude stocks, traded sideways in overnight trading and posted a high of $76.63. However, the market sold off sharply throughout the session, extending its losses to $4.50 or over 5.8% as it posted a low of $72.16 in afternoon trading. The market was pressured by the number of initial unemployment benefit claims increasing to a three- month high in the week ending November 10th, suggesting that labor market conditions were continuing to ease. Also, production at U.S. factories fell by more than expected in October. The oil market later retraced some of its losses ahead of the close, with the December contract settling down $3.76 or 4.9% at $72.90 and the January Brent contract settling down $3.76 or 4.63% at $77.42. The product markets were also pressured and ended lower, with the heating oil market settling down 11.85 cents at $2.7502 and the RB market settling down 10.07 cents at $2.1011.

Technical Analysis:  The crude market, which breached its recent lows, is seen retracing some of its sharp losses before it continues on its downward trend. Although its slow stochastics are in oversold territory, they have crossed to the downside. Technically, support is seen at its low of $72.16, $72.10, $71.74 and $70.55-$70.50. Meanwhile, resistance is seen at $74.15, $74.65, $76.20, $76.63 followed by $76.86 and $77.35.

Fundamental News:   White House spokesman, John Kirby, said the U.S. would like China to use its communications lines with Iran to convey the message that a wider war in the Middle East should be avoided. When asked whether U.S. President Joe Biden had received assurances from China’s President Xi Jinping that he would urge Iran to stop attacking U.S. forces in Syria and Iraq, he said “We certainly would encourage them to use those lines to reiterate to the Iranians that we do not want to see a deepening or an escalation of the conflict in the region.” 

The U.S. Department of Treasury said the U.S. has extended its authorization for certain transactions with PDVSA, allowing transactions through May 16th.

According to a notice posted on the U.S. Department of Treasury website, the U.S. has issued a new round of Russia-related sanctions targeting three Liberian flagged crude tankers, among others.

The Biden administration on Thursday said it would hold an auction of oil and gas drilling rights in the Gulf of Mexico on December 20th following a court order. Earlier this week, the U.S. 5th Circuit Court of Appeals dismissed an effort by environmental groups to block an expansion of the sale and said it must be held within 37 days.

Data from the Joint Organizations Data Initiative showed that Saudi Arabia's crude oil exports in September increased by 3% on the month to 5.75 million bpd. Saudi Arabia’s crude oil production increased 0.7% to 8.98 million bpd. Domestic refineries' crude throughput increased by 336,000 bpd to 2.866 million bpd while direct crude burn fell by 120,000 bpd to 606,000 bpd.

The U.S. EPA reported that the U.S. generated 733 million biodiesel (D4) blending credits in October, up from 673 million in September. It also reported that the U.S. generated 1.3 billion ethanol blending credits in October, up from 1.18 billion in September.

Early Market Call - as of 8:10 AM EDT

WTI - December $73.87, up 97 cents

RBOB - December $2.1232, up 2.21 cents

HO - December $2.7699, up 1.97 cents


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