This week (11.28-12.4), crude oil has shown a range-bound oscillating trend overall. The average price of WTI this week is $68.65 per barrel, down $0.90 per barrel, or -1.31% from the previous week. Throughout the week, factors exerting downward pressure on oil prices include: record high us energy production, an increase in libya's crude oil production, and an anticipated increase in OPEC's crude oil production in November. On the other hand, the expected extension of production cuts by OPEC+ and geopolitical uncertainties support oil prices.

This week (11.28-12.4), crude oil has shown a range-bound oscillating trend overall, with an average price decline on a week-on-week basis.

During the week, international oil prices fluctuated within a range, with mixed market news. On one hand, increased crude oil supply has put pressure on prices. The National Oil Corporation of Libya (NOC) stated that Libyan crude oil production has rapidly recovered after the political dispute over the appointment of the new governor of the Libyan central bank was resolved, reaching a record high of 1.386 million barrels per day. Market institution surveys also showed that OPEC's crude oil output increased for the second consecutive month in November, with most of the increase coming from Libya, resulting in an average daily production of 27.02 million barrels, an increase of 0.12 million barrels from the previous month. In addition, the U.S. Energy Information Administration (EIA) data indicated that as of the week of November 29, U.S. crude oil production increased by 0.02 million barrels, setting a new record high of 13.513 million barrels per day.

On the other hand, investors are taking a wait-and-see approach regarding the OPEC+ meeting, which will be held on December 5 via video conference. According to sources, OPEC+ may extend the latest oil production cut measures until the end of the first quarter of 2025 during this week's meeting. Additionally, the tense geopolitical situation is also supporting oil prices, as Russia launched its second large-scale attack on Ukrainian energy infrastructure this month. Meanwhile, the ceasefire agreement reached between Israel and Hezbollah has also not been effectively adhered to. The Lebanese Ministry of Health accused Israeli forces of attacking targets within Lebanon, resulting in at least 11 deaths. Israel has claimed that the attacks were in response to Hezbollah's violation of the ceasefire agreement.

This week, the average spot price of international crude oil fell compared to the previous week. In the Middle East crude oil market, most of the spot cargoes for January loading have already been sold, but there are still some medium or heavy crude oil cargoes, such as those from Oman and Upper Zakum, that have not yet been traded. Market participants are focusing on the upcoming announcement of new official crude oil pricing from major Middle Eastern oil-producing countries and the supply situation for February loading. Saudi Arabia is still negotiating contracts with buyers for 2025, and it seems that they have reached agreements with some buyers. Other traders in Singapore point out that Saudi Aramco is maintaining its contract crude oil supply level for Japanese and South Korean contract buyers at the same level as 2024. Additionally, the spot price differential for Al Shaheen crude oil for February loading is $0.78-0.83 per barrel above Dubai, aligning with the price levels of February loading Dubai and Upper Zakum crude oil. In the Asia-Pacific crude oil market, Vietnam's PV OIL may sell 3-4 cargoes of February Vietnamese crude oil, such as Kingfisher and Ruby crude oil. An end user in Northeast Asia pointed out that the Vietnamese crude oil market may be somewhat weak due to the recovery of spot supplies. A trader in Singapore believes that the trading price for the cargo is around $5 per barrel above spot Brent. The company sold a cargo of Labuan crude oil for late January loading to Australia's Ampo at slightly above $7 per barrel above spot Brent.

This week, on the supply side, due to continued concerns about demand, OPEC+ is highly likely to postpone production increases at the oil production meeting on December 1. Ukraine's use of US-provided ATACMS missiles marks a significant escalation of the situation, while Russia launched a long-range missile in response, leaving uncertainty regarding the impact of the conflict between the two countries on global oil supply. Despite limited direct disruption to Russian fuel exports, given the strong export figures, the likelihood of imposing additional sanctions or restrictions on Russian oil is low.

On the demand side, as the world's largest oil importer, China's weakening demand puts downward pressure on the oil market. OPEC's monthly report lowered global oil demand growth expectations mainly due to China's weakness. The potential impact of the global economic slowdown on crude oil demand remains one of the core concerns in the market, as current global economic growth is below historical averages. The pent-up demand after the COVID-19 pandemic has been fully released, and with the rapid adoption of clean energy technology, the role of oil in transportation and power generation is increasingly being replaced.

US refinery utilization rates have increased, and despite the US crude oil production hitting a record high, net imports of US crude oil have surged by over 10 million barrels. Although US commercial crude oil inventories have still decreased, gasoline and distillate inventories have increased. According to the US Energy Information Administration, as of the week ending November 29, 2024, crude oil inventories were 4.87% lower than the same period last year; 5% lower than the average of the past five years; gasoline inventories were 4.03% lower than the same period last year; 4% lower than the average of the past five years; and distillate inventories were 5.4% higher than the same period last year but 5% lower than the average of the past five years. Furthermore, last week, the average daily imports of crude oil in the US were 7.29 million barrels, an increase of 1.207 million barrels from the previous week, while the average daily imports of refined oil were 147.9 thousand barrels, a decrease of 0.262 million barrels from the previous week.

Speculators have increased net long positions in light crude oil futures on the New York Mercantile Exchange by 3.4%. According to the latest statistics from the US Commodity Futures Trading Commission, as of the week ending November 26, the total open interest and short positions in WTI crude oil futures continue to decline, while long-short positions and net long positions have increased. Specifically, total open interest decreased by 1.6% week-on-week, long positions increased by 1.2% week-on-week, short positions decreased by 2.3% week-on-week, and net long positions increased by 3.4% week-on-week. As a result, the long-short ratio of WTI rebounded to 2.76, an increase of 0.10 or 3.62% week-on-week.

This week, concerns about the global economic outlook and the potential ceasefire agreement between israel and lebanon have led to a cooling of geopolitical panic in the oil market, resulting in continued withdrawal of funds from the crude oil futures market. From the funding situation in the market, although the relationship between israel and lebanon has eased, the situation in russia and ukraine remains tense, causing some funds to choose to withdraw from short positions and shift to long positions. In terms of oil price performance, WTI crude oil futures prices exhibited volatility but ultimately fell back below $69 per barrel. Looking ahead, the market is waiting for OPEC+'s oil production meeting to provide new guidance for the oil market, during which crude oil prices may experience small fluctuations while observing the situation. Based on current market expectations, there is a general bias towards the reduction alliance continuing to delay production increase plans.

On the technical chart, WTI crude oil futures prices fluctuated in range during the week. The main factors boosting oil prices that week included: first, a decrease in US EIA commercial crude oil inventories; second, heightened geopolitical tensions; third, bets that OPEC+ will continue to delay production increase; and fourth, strong manufacturing data from china. The main factors suppressing oil prices that week included: first, a larger-than-expected increase in US refined oil inventories; second, uncertainty about OPEC+'s delay in production increase; third, the possibility that the Federal Reserve may not cut interest rates at the December meeting; and fourth, institutions' concerns about increased supply prospects in 2025. As of the 4th, WTI closed at $68.54 per barrel, a decrease of $0.18 per barrel or -0.26% week-on-week; by the 4th of that week, WTI's weekly average price was $68.65 per barrel, a decline of $0.91 per barrel or -1.31%. From a technical perspective, the bearish strength in oil prices has weakened.

In terms of the economy, recent indicators from the usa show that economic activity continues to expand steadily. Since earlier this year, the labor market has generally shown some easing, with a rising unemployment rate but remaining low. Progress has been made towards the committee's 2% inflation target, although inflation remains relatively high to some extent. The minutes of the Federal Reserve meeting indicate that, given the current strong economic performance and slow inflation decline, Federal Reserve officials tend to adopt a "gradual" approach to shifting monetary policy towards a more neutral stance.

This week, market institutions reported that for most of the past three years, tankers carrying russian crude oil typically violated western sanctions by engaging in so-called ship-to-ship (STS) transfers at sea, far from prying eyes or hostile coast guard oversight. This practice is usually carried out in secrecy, with digital tracking beacons turned off or spoofed, helping to conceal the origin of the oil and aiding in breaching sanctions. It also creates another layer of insulation between buyers and sellers of the cargo.

On the 28th, OPEC+ announced that the production policy meeting originally scheduled for December 1 will be postponed to December 5. This move is intended to avoid a conflict with the Gulf Arab states summit, which will be held on December 1 in Kuwait City, where several OPEC+ member state ministers plan to attend. After deciding to postpone the meeting, OPEC+ will continue discussions in the coming days, with issues to be resolved including the previously scheduled increase in oil production by the UAE in January.

OPEC's average production in November was 27.02 million barrels per day, an increase of 0.12 million barrels per day from the previous month. Libya, which has resumed production after political crises eased, accounted for most of the increase; following the restart of the Sharara oil field in October, Libya's daily output increased by 0.11 million barrels to 1.14 million barrels, the highest level since July.

On the 3rd, the usa sanctioned 35 entities and ships, stating that these entities and vessels play a key role in a shadow fleet transporting illegal Iranian oil to foreign markets. These measures target tankers and ship management companies in multiple jurisdictions that use false documents, manipulate vessel tracking systems, and frequently change ship names and flags to transport Iranian oil overseas.

Jinlian Chuang expects that next week (December 5-11), the crude oil market is awaiting the OPEC+ oil production meeting which has been postponed to December 5. Most investors are betting that the production reduction alliance will continue to delay the time to increase production at this meeting, and this news is bullish for the oil market. In addition, several countries are experiencing turmoil. Besides the situations in Ukraine, Lebanon, and the Middle East, south korea has also issued a state of emergency, and geopolitical tensions support the oil market. Overall, the crude oil market may experience fluctuations and rise next week, with the mainstream running range for WTI expected to be $67-72 per barrel, and the mainstream running range for Brent expected to be $71-76 per barrel.

For market institutions or investors, attention can be paid to crude oil futures to participate in the crude oil market. Suppose a certain futures institution wants to engage in inter-temporal arbitrage to conduct market trade. In that case, this institution can formulate a trading strategy based on the current market conditions. As crude oil prices hit the bottom and fluctuate, unilateral trading will encounter risks. At this time, adopting a spread arbitrage trading method can effectively hedge the risks of unilateral trading. If the spread structure shows that the WTI crude oil futures near-future price difference continues to narrow, and the recent market sentiment has receded, then investors can hedge by buying recent contracts and selling future contracts. The trading profit will depend on the change in the price difference. If the current price difference continues to narrow, this inter-temporal arbitrage trade can still maintain positive returns.

Disclaimer:

The data, opinions and forecasts in this report reflect the personal judgement of the author on the day of the initial release of the report. They are based on information that the author believes to be reliable and publicly available, but the accuracy and completeness of this information are not guaranteed. The author also does not guarantee that his/her views or statements in the report will not change. In different periods, the author may issue a report inconsistent with the data, opinions and predictions of this report without notifying anyone. The information or opinions expressed in the report do not constitute investment advice for anyone, and the cases listed in this report are for demonstration purposes only. The author is not responsible for any losses incurred by anyone using the content of this report.

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