The EIA reported that U.S. crude oil production reached record levels

Recap: Oil prices fell for the eighth straight session on Wednesday after the EIA reported U.S. crude oil production reached record levels, as domestic crude oil inventories rose for the seventh week in a row. Prices began the session trading to the upside after it was reported that Russia and Saudi Arabia were discussing the possibility of cutting output next year. December WTI rose above $63.00 a barrel, while January Brent breached $73.00 a barrel. The move to the upside was short lived, as traders reacted to the bearish U.S. inventory report. WTI traded as low as $61.20, the lowest level a spot month contract has traded in 7 months, while January Brent hit a 3 month low, to trade at $71.35. Losses were pared and the settlement was mixed, with December WTI settling at $61.67 a barrel, down 54 cents, or 0.87%, while Brent for January delivery slipped 6 cents, or 0.08%, to finish the session at $72.07. Products were mixed after the release of the inventory report, as it showed U.S. gasoline stocks unexpectedly rose 1.9 million barrels, while distillate stocks fell 3.5 million barrels. Expectations were calling supply declines of 2.1 million barrels in gasoline and 2.03 million barrels for distillates. December RBOB lost nearly 2.8% to $1.647 a gallon. That was the lowest front-month settlement since December 2017. December heating oil rose 2.2% to $2.237 a gallon. 

Technical Analysis: Once again, December WTI failed to gain momentum above the ascending trend line seen on a daily spot continuation chart, and $63.11, the 38% retracement set by the October high of $77.09 and the June low of $40.50. This failure was met with a round of technical selling, pushing this spot contract closer to $58.78, and the 50% retracement of the aforementioned range. As mentioned previously, as long as December WTI remains below $63.11, bias will remain to the downside. Support rests at $61.20 and $58.60, with resistance set at $64.00 and $65.64.

Fundamental News: The EIA reported that crude stocks increased by 5.8 million barrels for the week ending November 2nd, the seventh consecutive week of gains, along with U.S. domestic crude oil production soaring by 400,000 b/d from the previous week and reaching an all-time high of 11.6 million b/d.

A senior OPEC source said a return to oil production cuts by the OPEC and non-OPEC alliance in 2019 cannot be ruled out to avert a possible oversupply that could weigh on prices.  A ministerial committee of some members of OPEC and allies meet on Sunday in Abu Dhabi to discuss the market and outlook for 2019.

Tass news agency reported that Russia and Saudi Arabia have started bilateral discussions over possible 2019 oil production cuts.  It reported that Saudi Arabia proposed the cuts.

Russia’s Energy Minister, Alexander Novak, said that the global oil market was well-balanced.  He also said the ministry would hold consultations with Russian oil producers ahead of a meeting of the monitoring committee of OPEC and non-OPEC producers later this month. 

A senior Kuwait official said the country plans to increase its oil output capacity for light crude to 250,000 bpd from its current output level of 175,000 bpd. 

IIR Energy reported that US oil refiners are expected to shut in 1.407 million bpd of capacity in the week ending November 9th, increasing available refining capacity by 210,000 bpd from the previous week.  IIR expects offline capacity to fall to 486,000 bpd in the week ending November 16th. 

Early Market Call – as of 9:00 AM EDT

WTI – Dec $61.61, down 6 cents

RBOB – Dec $1.6562, up 91 points

HO – Dec $2.2099, down 2.77 cents

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