The EIA reported a 10.3 million barrel build in U.S. crude oil inventories

Recap: Crude oil prices continued to bounce from the extreme sell-off made earlier in the week despite the 10.3 million barrel build in U.S. crude oil inventories as reported by the EIA. The significant stockpile build, combined with growing concern about weakening global demand amid rising production kept the rebound that began Wednesday at bay, pushing U.S. crude oil back below $57.00 a barrel. However, prices remained steady, as stockpiles declined in both gasoline and distillates. December WTI settled at $56.46 a barrel, up 21 cents, or 0.37%, while Brent for January delivery tacked on 50 cents, or 0.76%, to settle at $66.62 a barrel. December RBOB fell 0.3% to $1.557 a gallon while December heating oil fell 1% to $2.074 a gallon.

Technical Analysis: The technical rebound off of $54.48, the 62% retracement set by the October high of $77.09 and the June low of $40.50 continued on Thursday, as technical indicators have shifted to the upside. Given how hard and how fast this market came off, the rebound is not surprising. We would look for the spot WTI contract to try and recapture $58.80, the 50% retracement set by the aforementioned range. Above this level, additional resistance can be found at $60.00 and $63.11. Support remains at $54.48 and below that at $53.04.

Fundamental News: The EIA reported that US crude oil stocks increased by 10.3 million barrels in the week ending November 9th, the largest build since early December 2017, as production reached a new record and the government released more barrels from its reserves.  US crude oil production increased by 100,000 bpd to 11.7 million bpd, the highest on record, while net US crude imports increased by 268,000 bpd.  The US Department of Energy had offered about 11 million barrels of oil for sale from the country’s SPR to be delivered between October 1st through November 30th and those barrels have been arriving in the market. 

Saudi Arabia’s Energy Minister, Khalid al-Falih, met with the president of Libya’s OPEC delegation and National Oil Corp chief, Mustafa Sanallah.  During the meeting, Saudi Arabia’s Energy Minister discussed the importance of cooperation between OPEC and non-OPEC oil producers to maintain market stability and welcomed Libya’s return to “good production levels.”

Bank of America Merrill Lynch said that while it is concerned about US-China trade, it still believes prompt Brent prices will likely move over $75/barrel in the first half of 2019.  It believes that oil is oversold and will likely bounce up from the current levels, as OPEC cuts production in December.  It sees WTI prices averaging $67.30/barrel in 2018 and $71/barrel in 2019.  Meanwhile, it sees Brent prices averaging $74.10/barrel in 2018 and $80/barrel in 2019. 

Barclays sees Brent oil prices for 2018 at $73/barrel. It kept its 2019 Brent forecast unchanged at $72/barrel and continues to see risks skewed to the upside next year. 

Gasoline stocks independently held in the Amsterdam-Rotterdam-Antwerp refining and storage hub in the week ending November 15th fell by 4.67% on the week and by 8.36% on the year to 899,000 tons.  Gasoil stocks fell by 7.11% on the week but increased by 14.34% on the year to 2.208 million tons while its fuel oil stocks fell by 27.42% on the week and by 29.06% on the year to 913,000 tons.  Naphtha stocks fell by 13.41% on the week but increased by 28.41% on the year to 226,000 tons while jet fuel stocks fell by 1.24% on the week and by 14.97% on the year to 636,000 tons. 

Colonial Pipeline Co is allocating space for Cycle 66 shipments on Line 20, which carries distillates from Atlanta to Nashville, Tennessee. 

Early Market Call – as of 8:00 AM EDT

WTI – Dec $57.44, up 96 cents

RBOB – Dec $1.5850, up 2.91 cents

HO – Dec $2.0927, up 1.91 cents

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