Recap: The crude market remained in its sideways trading range on Tuesday, as it continued to trade within last Thursday’s trading range for the third consecutive session. The market ended lower as traders weighed the smaller than expected OPEC+ output increase in November against a possible oversupply. JP Morgan said that global oil inventories increased every week in September, adding 123 million barrels during the month. Meanwhile, China is building oil reserve sites at a rapid pace as part of its campaign to increase stocks. The crude market traded to a high of $62.04 in overnight trading before it sold off sharply to a low of $60.72 by mid-morning. However, the market quickly bounced off its low and traded in a 60 cent trading range during the remainder of the session. The November WTI contract settled up 4 cents at $61.73 and the December Brent contract settled down 2 cents at $65.45. The product markets ended the session in mixed territory, with the heating oil market settling up 2.1 cents at $2.2653 and the RB market settling down 77 points at $1.8939.
Technical Analysis: The crude market will likely remain in its sideways trading range barring a major unexpected change in inventories. The market remains cautious as traders weigh the OPEC+ increase and expectation for a supply surplus in the fourth quarter as well as next year. The weekly petroleum stocks reports are expected to show a build in crude stocks of over 2.8 million barrels on the week. The oil market is seen finding resistance at $62.04, $62.12, $62.54, $62.70, $62.89, $63.26, $63.41 and $64.12. More distant resistance is seen at $65.40 and $66.42. Meanwhile, support is seen at $60.72, $60.55, $60.40, $60.29, $59.98, $59.70 and $58.49.
Fundamental News: The Energy Information Administration said U.S. oil production is expected to reach a larger record this year than previously expected, even as the agency warned that an oversupply of oil will weigh on prices in the months ahead. It expects U.S. oil production to average 13.53 million bpd this year, up from its prior forecast of 13.44 million bpd. Oil output averaged 13.23 bpd last year, which was the prior record. The anticipated increase in U.S. output defies growing concerns that the oil market is oversupplied, with the EIA noting that it expects crude oil inventories to increase throughout next year and put significant downward pressure on prices in the months ahead. U.S. West Texas Intermediate crude prices are expected to average around $65/barrel this year, a 15% decline from last year. Brent crude oil prices are expected to average around $68.64/barrel, down nearly 15% from last year.
U.S. President Donald Trump expressed optimism on Tuesday about progress toward a Gaza deal and said a U.S. team just left to take part in the negotiations.
Russia’s Deputy Prime Minister, Alexander Novak, said that OPEC+ did not discuss increasing quotas after November. He also stated that OPEC+ countries did not discuss increasing quotas more than 137,000 bpd in November.
Chevron said Monday it continues producing fuel at its El Segundo refinery despite a fire shutting its main jet producing unit at the refinery back on October 2nd. Chevron said it was working to restart some of the processing units that were shut down due to a fire.
The EIA reported that the U.S. is well stocked with propane heading into the winter. It said that for the week ending September 26th, U.S. propane inventory was 103 million barrels, about 13 million barrels more than the previous five-year average for this time of year. The EIA said this year, weekly inventories have consistently remained above the five-year average since late May, adding that the Gulf Coast, where most U.S. petrochemical consumption and propane export capacity are located, accounts for about 70% of U.S. propane storage capacity.
Early Market Call – as of 8:25 AM EDT
WTI – Nov $62.75, up 71 cents
RBOB – Nov $1.9199, up 1.32 cents
HO – Nov $2.2882, up 1.2 cents
