Crude Oil Prospects: Near-Term Caution Likely To Dominate
On Friday, investors reduced their open interest stakes in crude oil futures exchanges for the second run in a row, this time by approximately 1.8K contracts, according to CME Group’s comprehensive prints for the commodity. Volume fell by almost 321K contracts in the same direction as the prior build, somewhat correcting the prior design.
WTI is still aiming for the highs of 2021. So far, the rebound in the pricing of WTI appears to be stable. Nevertheless, Friday’s increase occurred against a backdrop of declining open interest and activity, indicating that further progress is out of favor in the short future. Thinking long term, the asset is still expected to retest its 2021 peaks around the $77.00 level per barrel in the short future, according to the bullish outlook.
WTI Rises To $76 As OPEC+ Maintains Output Strategy
OPEC and its partners (OPEC+) are likely to retain its present oil output policy of pumping 400,000 barrels a day to the industry in November. This comes before the coalition’s internet forum at 1300 GMT, amid expectations of an additional rise in OPEC+ production to rein in the surging cost of crude.
WTI launched a dramatic recovery from recent lows of $75.33 in response to the above data. Although more rise remains unlikely amid hesitant European equity trade. Concerns about China Evergrande, growing inflation threats, and US political turmoil reduce market sentiment, so restricting the rise in quicker oil. Additionally, investors prefer to remain neutral leading into the OPEC+ summit. WTI is currently up 0.05 percent on the day, moving at $75.92. Last week, the dark gold touched multi-year peaks of $76.67.
WTI CHART. Source: Tradingview.com
Fundamental Outlook: Bearish
US oil stocks increased by a surprising 4.1 million barrels last week, according to the official API statistics. As we approach the end of the year, US crude oil often exhibits a weaker seasonal trend. The largest loss occurred in 2008 when Oil suffered a massive-58.78 percent decline. Between 2012 and 2020, the Baltic Dry Bulk Shipholding Company (BDI) moved out of a trading range of 600-2300. If BDI commits above 2300, it is quite likely to reach test 4300.
This would be favorable for dry bulk transportation equities since it would indicate robust commodity demand. Libya and Iran may re-enter the oil market if the Biden government adopts a more dovish stance toward the nuclear deal with Iran. Iraq may strain to adhere to output quotas, as oil accounts for 97 percent of the country’s finances. According to the IEA, vaccines are unlikely to come to oil’s aid until the second half of next year. Libyan output has increased substantially in recent weeks, reaching 500,000 barrels per day from less than 100,000 during the sanctions. A break underneath the post-summer downtrend may serve as a wake-up call to OPEC+, compelling it to reconsider January’s two million barrel rise in output.
Finally, more people are working from home. Work travel and commuting are now less frequent. Nonetheless, this could become a permanent change, affecting fuel demand. For example, in Singapore, roughly half of the population works from home. The digital world affords acceptable work-from-home opportunities.
