Oil prices fell after a larger-than-expected build in U.S. crude inventories

Recap: Oil prices fell on Wednesday after a much larger-than-expected build in U.S. crude inventories and after Reuters reported that the signing of a U.S.-China trade deal could be delayed until December. Oil prices, which were trading higher on the day, slipped after the EIA reported a 7.9 million barrel build in U.S. crude oil inventories, which encompassed a 1.7 million barrel increase in stockpiles held at Cushing, OK. Prices extended losses after it was reported that the meeting between U.S. President Donald Trump and Chinese President Xi Jinping could be delayed until December.  December WTI fell as much as $1.12 or 1.95% to a session low of $56.11 a barrel. Brent for January delivery lost as much as $1.37 or 2.17%, to a low of $61.59 a barrel. Losses were slightly pared with December WTI settling at $56.35 a barrel, down 88 cents, or 1.54%, while January Brent settled at $61.74 a barrel, down $1.22, or 1.94%. December gasoline RBZ19, -2.81%  rose 1.1 cents, or 0.7%, to $1.6746 a gallon, while December heating oil HOZ19, -1.30%  settled at $1.9278 a gallon, down 2.9 cents, or 1.5%.

Technical Analysis:  Despite Wednesday’s sell off, December WTI continues to dance around both the 200-day moving average and $56.81, the 50% retracement provided by the September high of $62.74 and the October low of $50.89. That being said, we would look for continued sideways trading within the upward channel that has been forming on a daily bar chart for the December contract. Resistance remains at $58.21 and above that at $59.11 and $60.00. Support comes in at the 10-day moving average, which is currently set at $55.91 and below that at $55.30, the 50-day moving average.

Fundamental News:  The EIA reported that US crude stocks increased by 7.9 million barrels in the week ending November 1st as refineries cut output sharply.  Refinery crude runs fell by 237,000 bpd.  Meanwhile, gasoline stocks fell by 2.8 million barrels, while distillate stocks fell by 622,000 barrels on the week. 

According to the Wall Street Journal, Saudi Arabia will urge OPEC members to cut production ahead of the Aramco IPO. 

Russia’s Energy Minister, Alexander Novak, said the current oil price of more than $60/barrel shows that markets are stable. 

Libya’s crude exports will continue their upward trend in November, with loadings estimated to average 1.17 million bpd this month. 

IIR Energy reported that US oil refiners are expected to shut in 1.3 million bpd of capacity in the week ending November 8th, increasing available refining capacity by 175,000 bpd from the previous week.  Offline capacity is expected to fall to 951,000 bpd in the week ending November 15th. 

TC Energy has declared force majeure after an oil spill forced its Keystone oil pipeline to shut down last week.  It told shippers that the shutdown means that it cannot carry out 30% of their normal November shipments on the 590,000 bpd line from Alberta to US Midwest refineries.   

Iran has started to inject uranium gas into centrifuges at its underground Fordow nuclear facility, as part of its fourth step to scale back its commitments to the nuclear deal with major powers.  French President, Emmanuel Macron called Iran’s move “grave”, saying it explicitly signaled Iran’s intent for the first time to quit the nuclear deal with world powers.  Russia’s Foreign Minister, Sergei Lavrov, said events unfolding around the nuclear deal were extremely alarming and called on Iran to fulfill the terms of the deal.  Later on Wednesday, Iran’s Atomic Energy Organization said Iran prevented an inspector from the UN’s IAEA from entering the Natanz nuclear facility because of a concern she may be carrying “suspicious material.”

Early Market Call – as of 8:55 AM EDT

WTI – Dec $57.28, up 93 cents

RBOB – Nov $1.6391, up 1.26 cents

HO – Nov $1.94, up 1.24 cents

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