Recap: The oil market traded lower on Monday as it continued to erase its previous gains in light of the diplomatic efforts over the weekend to prevent the Gaza conflict from spreading. The recent diplomatic developments helped ease tensions, bringing some hope of a de-escalation in the conflict after Hamas released two U.S. hostages held in Gaza on Friday. Aid convoys started to arrive in the Gaza Strip from Egypt over the weekend, while U.S. President Joe Biden had calls on Sunday with the leaders of Canada, France, Britain, Germany and Italy following his visit to Israel last week. The oil market continued to trend lower after posting a high of $88.29 on the opening on Sunday night. It extended its losses to over $2 as it sold off to a low of $85.35 in afternoon trading. The market later settled in a sideways trading range ahead of the close. The December WTI contract settled down $2.59 at $85.49 and the December Brent contract settled down $2.33 at $89.83. The product markets ended the session in negative territory, with the heating oil market settling down 6.11 cents at $3.0955 and the RB market settling down 4.51 cents at $2.3285.
Technical Analysis: The crude market will remain driven by the developments in the Israel-Hamas conflict. Technically, the market is seen remaining range bound as its stochastics look ready to trend sideways and cross to the downside. The oil market is seen finding support at its low of $85.35, $85.03, $84.39 and $83.89. Meanwhile, resistance is seen at $87.55, $88.05, $88.23, followed by $88.41 and $89.85. More distant upside is seen at $89.89, $90.96 and $92.48.
Fundamental News: Citi said it expects a meaningful rebound in commodities assets under management for October towards $700 billion, on the back of Middle East geopolitics and position squaring across the petroleum complex and gold. Citi said short-term momentum model forecasts higher oil prices into the month-end with a neutral-bullish signal for ICE Brent in the next 5-10 days.
Chevron Corp said it will buy Hess Corp in a $53-billion all-stock deal. CEO John Hess of Hess Corp, is expected to join Chevron's board of directors once the deal closes. Chevron Corp said it will no longer use put options to hedge the crude oil production it is acquiring from Hess Corp, once the deal is completed. In its most recent earnings report, the company had contracts in place that locked in $70/barrel for about 80,000 bpd of WTI production and $75/barrel for about 50,000 barrels of Brent production for the rest of the year.
Global diesel imports into Europe so far this month were pegged at 3.76 million metric tons, down from 5.78 million tons last month. Meanwhile, LSEG tracking shows that gasoline exports from northwest Europe to the U.S. and West Africa are set to reach 986,000 metric tons so far this month, down from 1.27 million tons in September.
IIR Energy reported that U.S. oil refiners are expected to shut in about 1.9 million bpd of capacity in the week ending October 27th, increasing available refining capacity by 375,000 bpd. Offline capacity is expected to fall to 1.1 million bpd in the week ending November 3rd.
Citgo Petroleum Corp reported that operating conditions at its 167,500 bpd Corpus Christi, Texas East plant have made flaring necessary on October 22nd.
Delek reported that equipment malfunction resulted in flaring at its 73,000 bpd Big Spring, Texas refinery on October 22nd. The refiner is trying to minimize emissions while its attempts to restart the unit.
Early Market Call – as of 8:55 AM EDT
WTI – December $85.61, up 12 cents
RBOB – November $2.3188, down 97 points
HO – November $3.0818, down 1.37 cents
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