Over the weekend, data revealed that the Chinese economy is worse than originally thought and Beijing may need to add even more stimulus. Chinese exports fell nearly 8.3% last month and exports into the U.S. decreased for the first time in four months. Additionally, U.S. refinery utilization continues to run at high-capacity, 32 rigs have been added in the past 6 weeks adding to oversupply, and OPEC still has no plans on cutting production. "Up to the December 4 OPEC meeting there is no reason for OPEC to hold back production," Bjarne Schieldrop, chief commodities analyst at SEB, said in a note posted in a Reuters article published earlier this morning.
However, even with last week’s record drop of oil futures and refined product prices, as well as multiple sources of grim and bearish news throughout the weekend and into this morning; today, we are witnessing a break in the negative trend as oil rises from a six-month low. Unexpectedly, WTI oil prices have risen from a six-month low this morning and are up +$0.71 to $44.58/barrel and both heating oil and gasoline are up +$.0426 and +$.0516 respectively. Many speculators and market analysts will attest to this by saying that oil has dropped too low too fast. A market rebound was due and because of the roll approaching, now was the time. Additionally, Saudi Arabia continues to accelerate production even during a rapid drop in oil prices in order to maintain market share to Iraq and bully out anyone else, no matter what the short term consequences they may face. Finally, the drastic spike in the market this morning may be due to a cut-back on U.S. investments.
The following graph illustrates the changes year over year for Saudi Arabia crude oil production against the percent change of WTI crude oil prices.
As for our local market, gas in the Chicago area is up 7cpg in response to news about BP’s refinery in Whiting, IN needing to repair a crude unit.