Oil Futures Firmed on Tuesday

Market Insights
Heating Oil
Gasoline
Crude
November 30, 2022

Recap:  Oil futures firmed on Tuesday, as traders hoped the loosening of China’s strict COVID-19 restrictions would lead to an increase in demand. The potential for new output cuts from the Organization of the Petroleum Exporting Countries and their allies, together known as OPEC+, which meets Sunday, also provided support for oil prices but gains were capped after reports indicated that the group may keep its production policy unchanged. WTI crude for January delivery rose 96 cents, or 1.2%, to settle at $78.20 a barrel. Brent for January delivery lost 16 cents per barrel, or 0.19% to $83.03. RBOB for December delivery gained 0.15 cent per gallon, or 0.06% to $2.3321, while ULSD for December delivery gained 8.05 cents per gallon, or 2.50% to $3.2959.

Market Analysis:  Oil futures may be on the verge of heading higher as China lifts COVID restrictions and expectations rise that OPEC+ would adjust their production plans at the upcoming meeting. Traders will also keep a watchful eye on the U.S. Dollar since a weaker dollar tends to support dollar-denominated commodities. January WTI moved up toward the 10-day moving average and as in the past few visits up at this technical indicator, the market retreated. With this average edging against $80, we would consider a push above $80 opening up the opportunity for this market to trade higher. Resistance is set at $79.80 - $80, $81.41 and $83.16. On the downside, support is seen at $76.44, $74.69 and $73.08.  

Fundamental News:  Five sources stated that OPEC+ is likely to keep oil output policy unchanged at a meeting on Sunday, although two sources said an additional production cut was also likely to be considered to support prices that have fallen due to fears of economic slowdown.

Chevron Corp aims to start receiving cargoes of Venezuelan oil as early as December after the oil company last week received a U.S. license to do so. However, Venezuela may not be as eager because U.S. sanctions restrict payments. On Saturday, the United States granted Chevron a six-month license to operate in Venezuela, reinstating oil trading privileges it had, while preventing exchanges of cash and requiring the crude cargoes go to U.S. refiners. Executives at Venezuelan state firm PDVSA initially welcomed the authorization for a partial return to the United States. However, they are less enthusiastic after learning of license terms that will not allow Chevron to reimburse operational costs or pay taxes and royalties in Venezuela.

The head of the IEA, Fatih Birol, said Russia has lost Europe as its largest energy client "forever". He said the IEA expects Russian crude oil production to be curtailed by about 2 million bpd by the end of the first quarter next year. He also stated that he expects OPEC+ to consider “the rather fragile situation of the global economy” in making decisions.

According to Refinitiv analysis, Europe imported 7.6 million tons of diesel in November, a record volume ahead of a February 2023 ban on Russian diesel imports and amid low regional stocks. Half of the imports in November came from Russia.

According to Refinitiv analysis, Europe imported 7.6 million tons of diesel in November, a record volume ahead of a February 2023 ban on Russian diesel imports and amid low regional stocks. Half of the imports in November came from Russia. Reuters analysts also stated that transatlantic exports remain subdued, although U.S. East Coast stocks at 10-year lows may prompt an increase. Total November export volumes across the U.S. and West Africa arbitrage routes reached 1.4 million tons through November 25th, down from 2 million tons last month.

Early Market Call - as of 10:05 AM EDT

WTI - January $80.57 Up $2.37

RBOB - December $2.3945 Up 0.0679

HO - December $3.3816 Up 0.0874

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