Recap: The crude market fell on Wednesday as it remained weighed down by concerns of a possible supply glut and weak economic data. U.S. manufacturing contracted for an eighth consecutive month in October while China’s factory activity fell for a seventh month in October. Meanwhile, the U.S. dollar index was also a three month high, supported by a division among the Federal Reserve Board, indicating low odds for an interest rate cut at the Fed’s meeting in December. The market traded mostly sideways in overnight trading following the API report, which showed a large build of 6.52 million barrels in the latest week. The market retraced some of its losses and rallied to a high of $61.09. However, the market once again erased its gains ahead of the release of the EIA report and remained pressured after the report showed a large build in crude stocks of 5.2 million barrels. The market sold off to a low of $59.52 ahead of the close. The December WTI contract settled down 96 cents at $59.60, while the January Brent contract settled down 92 cents at $63.52. The product markets settled in negative territory despite the draws in product stocks, with the heating oil market settling down 1.21 cents at $2.4325 and the RB market settling down 1.35 cents at $1.9093.
Technical Analysis: The oil market is seen remaining pressured amid the build in oil stocks and concerns over an oversupply and lower demand following the weak economic reports. Technically, the market is also still seen trending lower, with stochastics pointing down. The market is seen finding support at $59.52, $59.28, $58.49 and $57.34. Meanwhile, resistance is seen at $61.09, $61.50, $62.17 and $62.59.
Fundamental News: The EIA reported that U.S. field production of crude oil increased to a record high for a second consecutive week. The EIA said output reached 13.651 million bpd during the week ending October 31st, surpassing the prior all-time high of 13.644 million bpd during the week ending October 24th. The agency also said gasoline stockpiles in the U.S. Midwest region fell to a record of 42.536 million barrels during the week ended October 31st.
On Tuesday, the EIA said oil and gas producers will need to step up drilling to sustain or increase output due to rapid declines in production from existing wells. It said that as U.S. crude oil and natural gas production have increased, so has the volume of production decline from existing wells. It said production from oil and natural gas wells declines over time as reservoir pressure decreases and new wells are required to maintain the same production level.
The CEO of Diamondback Energy told shareholders this week the company plans to hold the line on its shale oil production in the Permian Basin with the current oil price of just under $60 per barrel.
The State of Alaska reported that North Slope crude production in October rose by 10,000 b/d from September levels to 467,673 b/d, but down some 3,000 b/d from October 2024 levels.
IIR Energy said U.S. oil refiners are expected to shut in about 803,000 bpd of capacity in the week ending November 7th, increasing available refining capacity by 189,000 bpd. Offline capacity is expected to fall to 500,000 bpd in the week ending November 14th.
The FERC on Monday rejected Colonial Pipeline’s proposed tariff modifications that would have changed how the company handles different gasoline grades with varying RVP specs. The changes the company had hoped would have streamline operations and increased shipping capacity by 10,000 b/d.
Gibson Energy’s CEO told shareholders this week the company is expecting to receive its first oil from the Cactus II pipeline connector this week at its South Texas gateway Terminal marine export facility.
Early Market Call – as of 8:35 AM EDT
WTI – Dec $60.02, up 38 cents
RBOB – Dec $1.95, up 3.76 cents
HO – Dec $2.5123, up 8.35 cents
