Crude Declines Despite OPEC Output Cut
Today’s Spotlight Market
The Weekly Energy Information Administration (EIA) energy stocks report was delayed one day due to the Veterans Day holiday. The EIA reported that U.S. Crude inventories rose by 4.224 million barrels last week versus expectations for a 1.1 million barrel rise. Distillate inventories, which include both Heating Oil and Diesel fuel, posted a surprising gain of 352,000 barrels when analysts were expecting a draw of 1 million barrels. Energy bulls did take some solace from Gasoline inventories, which fell by a larger than anticipated 2.102 million barrels last week.
Fundamentals
The Crude Oil market, like most commodities, is mired in a bear market slump, with the lead month December futures trading just above its 2015 lows. Traders appeared to have shrugged off a decline in Oil output from The Organization of the Petroleum Exporting Countries (OPEC) in October as the global market remains well supplied in Crude. In its monthly oil market report, OPEC reported Oil production among its members at 31.382 million barrels per day in October, down 256 thousand barrels per day from September. Iraq accounted for the largest volume decrease at nearly 195,500 barrels per day. Even Saudi Arabia, OPEC?s largest Oil producing nation, saw production decline last month by 72,000 barrels per day. Saudi Arabia has been reluctant to support lower Oil production among OPEC members despite the steep drop in global Crude prices as it fears losing market share to non-OPEC producers, especially from shale Oil producers in North America. The next meeting of OPEC producers scheduled for December 4 in Vienna could prove contentious as several producers, including Venezuela and Algeria are expected to lobby strongly for a cut in production to help support prices. Many OPEC nations are dependent on Oil revenues to meet the vast majority of government expenditures and the collapse in Oil prices has caused severe economic pain for government budgets.? However, Saudi Arabia remains the dominant force in OPEC and it appears that the kingdom?s Oil Ministers are prepared to weather continued economic pain in order to preserve its market share despite the pleas from fellow cartel members.?? ?
Technical Notes – View Today’s Chart
Looking at the daily chart for December Crude Oil, we notice prices trading at 3-month lows following the overall bearish EIA energy stocks report. With minor chart support at 42.58 failing to hold, there is little in the way of support until prices trade below $40. The 14-day RSI is weak but currently holding above oversold levels with a current reading of 34.47. The contract low at 39.22 is seen as the next major support level for the December futures, with resistance found at the November 4 high of 48.28.?
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