We expect the U.S. crude oil inventories to continue to build as the glut persists, and the demand for heating oil in the northeastern U.S. to diminish due to the warmer winter temperatures that the El Niño weather pattern brings. According to Reuters, shipping data shows that about 40 oil tankers with nearly 20 million barrels of Iraqi oil are due to sail to the United States in November, almost 40% above the amount booked to arrive in October. At some point in time, this crude oil will show up in U.S. inventories.
The state-controlled oil producer Petróleo Brasileiro SA, said on Monday that a three-week-long strike by Brazilian oil workers appears to be winding down after the majority of the unions agreed to resume work. According to The Wall Street Journal, the production is now “normalizing” and the company expects to maintain its 2.125 million barrels a day of oil production for 2015, Petrobras said in a statement.
As of November 17, there are 275,013 long positions of light sweet crude oil futures, traded on the New York Mercantile Exchange (NYSE) by managed money or hedge funds, a decrease of 7,775 long positions from the previous week, according to the Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) each Friday.
This is compared to about 154,181 short positions, an increase of 16,246 short positions from the previous week where light sweet crude oil contracts are traded in units of 1,000 barrels. Hedge funds have increased their net short positions by about 24,021 contracts, as they are betting that the crude oil price could go lower.
From our near-term technical viewpoint, the crude oil price has been moving in a bearish lower low chart pattern, meaning every low (L) is lower than the previous low. In order to establish an uptrend, the crude oil price needs to break out and stay above the November high of $48.36 per barrel level. There are walls of resistances between the current price and that November high, though.
A headline risk is the Governing Council of the European Central Bank (ECB) meeting in Frankfurt on December 3. The ECB could announce the expansion and extension its 1.1 trillion euro bond-buying program. The move could bump up the U.S. dollar against the euro and put even more selling pressure on crude prices.
Other events that could influence the price of crude oil are the U.S. nonfarm payrolls report for November to be released by the Labor Department and the meeting of the OPEC ministers in Vienna, both on December 4. The OPEC meeting could be a non-event, as Russia’s Energy Minister Alexander Novak told TASS that Moscow has not yet received an invitation to the OPEC meeting but is ready to take part in it.