Recap: The crude market sold off 1.9% on Tuesday, posting its third consecutive down day, as traders discounted the impact of the U.S. sanctions imposed against Russia’s Lukoil and Rosneft, while a potential OPEC+ plan to increase their output at their meeting this weekend weighed on sentiment. The head of the IEA said the effect of sanctions on oil exporting countries will be limited because of surplus capacity. The oil market posted a high of $61.50 on the opening and continued to trend lower, posting a low of $59.76 by mid-day. The market later retraced some of its losses ahead of the close. The December WTI contract settled down $1.16 at $60.15 and the December Brent contract settled down $1.22 at $64.40. The product markets ended the session in mixed territory, with the heating oil market settling down 4.89 cents at $2.3872 and the RB market settling up 48 points at $1.9252.
Technical Analysis: The oil market will likely trade sideways as the market continued to weigh the impact of the sanctions imposed on Russia’s top two oil companies and the possible OPEC+ output increase in December. The market is likely to hold support as the weekly petroleum stocks reports are expected to show draws across the board. The market will also look for news on the talks scheduled for Thursday between U.S. President Donald Trump and China’s President Xi Jinping. The market is seen finding support at $59.76, $59.64, $59.28, $58.49 followed by $57.34 and $56.98. Meanwhile, resistance is seen at $61.50, $62.17 and $62.59.
Fundamental News: The International Energy Agency’s Executive Director, Fatih Birol, said sanctions on oil-exporting countries could push up crude prices but the effect will be limited because of surplus capacity. He said that while sanctions could push prices upward, the effect is limited with oil prices holding at around $60/barrel due to a huge amount of surplus capacity. He said “Today, despite so many political tensions around the world, Middle East, Russia, Ukraine, major economic, trade wars, oil prices are still $60, exactly what we said.” He added “The oil and gas markets will enter a very distinct period, which is in the absence of major geopolitical tensions, we are going to see lower oil and gas prices.”
Many Indian refiners have paused new orders for Russian oil since U.S. sanctions were imposed on Russia’s Lukoil and Rosneft last week as they await clarity from the government and suppliers, with some turning to the spot market for alternatives. An Indian government source said Indian companies will not buy Rosneft or Lukoil crude oil supplied by traders after the two Russian producers were hit by U.S. sanctions. The source said it is difficult to predict when Indian companies will place new orders for Russian oil. However, state-run Indian Oil said it would not stop buying Russian oil as long as it is complying with sanctions.
Ukrainian President, Volodymyr Zelenskiy, said Ukraine was ready for peace talks anywhere besides Russia and Belarus if those talks ended the war, but that its forces would “take no steps back” on the battlefield to cede territory. He also urged U.S. lawmakers to pass tougher sanctions on Russia, and said Ukraine would need stable financing from its European allies for another two or three years.
The Kremlin said that Russia offered top quality energy at a good price and so its partners would decide for themselves whether or not to buy Russian energy after the United States imposed sanctions on Russia’s top oil companies.
The CEO of Saudi Aramco, Amin Nasser, said crude oil demand was strong even before sanctions were imposed on Russia’s Rosneft and Lukoil and that Chinese demand was still healthy.
Early Market Call – as of 8:30 AM EDT
WTI – Dec $60.17, down 1 cent
RBOB – Nov $1.9421, up 1.04 cents
HO – Nov $2.3889, up 31 points
