WTI crude oil:
December WTI crude oil lost 56 cents on light volume of 874,343 contracts. Volume was the weakest since October 18 when the December contract gained 25 cents on volume of 790,741 contracts and total open interest declined by 17,099. On October 25, total open interest increased by 14,639 contracts, which relative to volume is approximately 35% below average. The December contract accounted for a loss of 1,178 of open interest.
As this report is being compiled on October 26 after the release of the EIA storage report, the December contract is trading 59 cents lower and has made a daily high of 50.10, which is below yesterday’s print of 50.93 and a new low for the move of 48.87, which takes out yesterday’s print of 49.27. December WTI remains on short and intermediate term buy signals. We have no recommendation.
The Energy Information Administration announced that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 0.6 million barrels from the previous week. At 468.2 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 2.0 million barrels last week, but are well above the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories decreased by 3.4 million barrels last week but are above the upper limit of the average range for this time of year. Propane/propylene inventories fell 2.1 million barrels last week but are near the upper limit of the average range. Total commercial petroleum inventories decreased by 8.7 million barrels last week.
Natural gas: December 2016 and January 2017 natural gas will generate short and intermediate term sell signals on October 26.
December natural gas lost 17.00 cents on heavy volume of 664,284 contracts. Volume was the strongest since October 13 when natural gas advanced 13.1 cents on volume of 696,527 contracts and total open interest increased by a spectacular 27,255. On October 25, total open interest declined by 20,039 contracts, which relative to volume is approximately 10% above average. The November contract accounted for a loss of 8,203 of open interest.
From the high of $3.556 made on October 14 through today’s low (2.991), the December contract has fallen 56.5 cents or approximately 16%. Natural gas has lost ground every day since October 19 and though open interest has declined, there is more liquidation ahead. As it stands, the December contract has pierced its August 19 low of 3.01 and also the June 2, 2016 print of 2.998. Stand aside.
From the October 19 research note on natural gas:
“The natural gas market has been trading firmly and on a seasonal basis tends to top out in late October. We expect a seasonal decline however, if temperatures dip below normal as winter approaches, natural gas prices could move sharply higher. Natural gas remains on short and intermediate term buy signals.”
From the October 13 research note on natural gas:
“Yesterday, November contract made a new contract high of 3.366, which slightly takes out the high of 3.352 made the week of January 12, 2015. The massive open interest increase at the contract high in yesterday’s trading in our view is a sign of danger. Typically near market tops, it is common to see volume expand and/or a substantial increase of open interest.”
“The massive increase of open interest indicates that Johnny-come-lately’s are entering the market because they fear they are missing the move. As this report is being compiled on October 14, the November contract is trading 6.3 cents lower on the day or -1.89%. As we mentioned in yesterday’s report there is a gap on the weekly chart between 3.351 and 3.444 which could be filled before the market heads south.”