Crude Oil Price Analysis for November 20, 2017

Oil prices surged higher on Friday running up 2.45%, and recapturing resistance seen near the 10-day moving average at 56.47. Oil rigs were flat on the week, and prices rebounded following the International Energy Agency’s negative report on oil demand.

Technicals

Crude oil surged higher and is poised to test resistance levels near the November highs at 57.92. Support is seen near the former breakout levels at 54.92. Momentum remains negative as the MACD (moving average convergence divergence) histogram prints in the red with a downward sloping trajectory which points to lower prices.

Rig Counts Remain Flat

The number of oil and gas rigs in the United States rose again this week, this time by 8, according to Baker Hughes, ending a short-lived downward trend in weeks prior.  The number of oil rigs stayed flat this week, while the number of gas rigs gained eight.

The total oil and gas rig count in the United States now stands at 915 rigs, up 327 rigs from the year prior, with the number of oil rigs standing at 738 versus 471 a year ago. The number of gas rigs in the US now stands at 177, up from 116 a year ago. Canada, too, saw an increase to oil and gas rigs of 5, with oil rigs climbing by 1 and gas rigs climbing by 4.  By state, Texas was the big winner, adding 7 rigs. Louisiana was the runner up, adding 4 rigs.

Heating Demand Should Drive Crude Oil

The early fall brought temperate weather to the mid-west and east, but as late fall settles in, it appears that the cold weather is hitting the large population zones.  The ridge/trough weather pattern that is expected by the National Oceanic Atmoshperic Administration, predicts that cold weather from the north will pushed down into the easter portions of the U.S., while the west will experience a heat wave driven from warmer weather from the south. If the pattern, stabilizes and does not move back to a zonal flow, were weather moves west to east which is generally more temperate, heating oil and propane could continue to see inventory declines.

Residential Heating Oil Prices Rose

Residential heating oil and propane prices continue to increase as stocks contract. The Northeast is the largest consumer of heating oil, and propane is the most popular exported fuel. U.S. propane stocks decreased by 2.5 million in the latest week according to the most recent inventory report released by the Department of Energy.  Stocks slid to 74.7 million barrels as of November 10, 2017, 11% lower than the five-year average inventory level for this same time of year. Heating oil inventories also declined in the latest week, and are also currently at the lower end of the 5-year range for this time of year.

The Energy Information Administration reported that residential heating oil prices averaged just over $2.80 per gallon, $0.06 cents per gallon more than last week and $0.42 per gallon higher than last year’s price at this time. The average wholesale heating oil price for this week is $2.03 per gallon, approximately $0.04 per gallon more than last week and $0.55 cents per gallon higher than a year ago.

Residential propane prices averaged $2.38 per gallon, nearly $0.34 cents per gallon higher than a year ago. Wholesale propane prices averaged $1.09 per gallon, nearly $0.2 per gallon higher than last week and almost $0.46 gallon higher than last year’s price.