The IEA report shows an increase of 100,00 barrels per day of OPEC output for the month of November

Recap: At the onset of Thursday’s session, oil futures fell toward key support, as traders responded to the IEA report, which showed an increase of 100,000 barrels per day of OPEC output during the month of November. Oil prices fell below unchanged, but failed to break to the downside, which in turn sparked technical buying. January WTI hit a mid-session high of $52.35 before trimming gains and falling into a period of sideways trading. Reports that Saudi Aramco would be cutting crude oil exports to U.S. refiners incited a fresh wave of buying, which pushed prices to fresh highs in post settlement trading. January WTI finished the session at $52.58 a barrel, up $1.43, or 2.8%, while Brent for February delivery settled at $61.45 a barrel, up $1.30, or 2.16%. January RBOB rose 4.1% to $1.478 a gallon and January heating oil added 1.4% to $1.877 a gallon.

Technical Analysis: After breaking below the bottom line on a symmetrical triangle, January WTI failed to the down side, prompting technical buying, which took this spot contract to fresh highs for the day. The aforementioned formation remains intact, and therefore we should see additional sideways trading. Support is set at $50.88 and below that at $50.00, with resistance set at $53.54 and $55.00.

Fundamental News: In its monthly report, the IEA, said the world oil market could move into a deficit sooner than expected due to OPEC’s output cut agreement with Russia and to Canada’s decision to cut supply.  The IEA kept its 2019 forecast for global oil demand growth at 1.4 million bpd, unchanged from its projection last month, and said it expected growth of 1.3 million bpd this year.  Uncertainty over the global economy stemming from US-China trade tensions could undermine oil consumption next year, as growth in supply gathers pace.  The IEA however raised the 2019 call on OPEC crude by 300,000 bpd to 31.6 million bpd.  It cut its non-OPEC oil supply growth forecast by 415,000 bpd to 1.5 million bpd compared with 2.4 million bpd in 2018.  The IEA reported that OECD commercial crude oil stocks increased in October by 5.7 million barrels to 2.872 million barrels.  The IEA stated that Saudi Arabia increased its crude oil production to an unprecedented 11.06 million bpd in November, up 410,000 bpd from October, ahead of the agreement with non-OPEC producers to cut output from next year.  Overall OPEC output increased by 100,000 bpd to 33.03 million bpd in November.  The IEA said unplanned supply losses from members Iran and Venezuela could effectively double the intended cutback of 800,000 bpd the cartel pledged last week.  OPEC production may fall by 1.4 million bpd from October levels to 31.5 million bpd during the first quarter and then fall further to 31.2 million bpd in the second quarter.      

Genscape reported that crude oil stocks held in Cushing, Oklahoma in the week ending Tuesday, December 11th fell by 821,982 barrels on the week and by 401,725 barrels from Friday, December 7th to 41,013,295 barrels. 

Saudi Arabia will target the US with sharp oil export cuts.  Bloomberg reported that Saudi crude shipments to the US in January could even test a 30-year low set in late 2017 of 582,000 bpd.  Saudi Arabia’s total exports are expected to fall to about 7 million bpd in January, down from 8 million bpd in Nov. 

Iran’s Oil Minister, Bijan Zanganeh, said Iran has no plans to cut its oil production, but will remain a member of OPEC. 

Rystad Energy said the OPEC and non-OPEC output cut agreement to cut production by 1.2 million bpd during the first half of 2019 will not be enough to ensure sustained and immediate recovery in oil prices and should be extended through the full year.  It said output needs to remain 700,000 bpd below the agreed target of 31.8 million bpd through 2019 to help Brent prices recover to $70/barrel. 

Early Market Call - as of 8:10 AM EDT

WTI - Jan $5245, down 13 cents

RBOB - Jan $1.4639, down 1.47 cents

HO - Jan $1.8724, down 44 points