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Below is Outlook on Crude Oil by Mr. Mahesh Kumar,  EVP & Head Capital  & Commodities Market  (Abans Group)

WTI Crude oil is expected to confront tough resistance near $69.50.

Oil markets have opened firmer on Monday morning after a dismal close on Friday. After the Saudis raised their official selling prices (OSP) for all grades of their crude oil into Asia for January, WTI Crude oil is trading comfortably near US$67.81/bbl, marginally higher than Thursday's low of $62.43/bbl. Over the benchmark, Aramco's flagship Arab Light was raised by US$0.60/bbl MoM to US$3.30/bbl. All grades to the United States were likewise raised, but all grades to Europe saw their OSPs reduced in January.

The November ISM services index in the United States unexpectedly surged +2.4 to a record 69.1 (data from 1997), beating expectations of a decrease to 65.0. Factory orders increased by +1.0 percent m/m and +1.6 percent m/m ex-transportation in October, outperforming expectations of +0.5 percent m/m and +0.6 percent m/m ex-transportation. In addition, the November unemployment rate in the United States decreased -0.4 percentage points to a one-and-a-half-year low of 4.2 percent, indicating a healthier labour market than the 4.5 percent expected. Despite this, nonfarm payrolls in the United States increased by 210,000 in November, falling short of estimates of +550,000 and marking the weakest gain in 11 months. US economic data was mixed for energy demand and oil prices.

The net long of crude oil futures fell by 20,423 contracts to 3, 87,234, according to the CFTC Commitments of Traders report for the week ended November 30. Longs increased by 1,276 contracts, while shorts increased by 21,699 contracts.

Crude oil prices are likely to remain affected due to Covid concerns which to undercut energy demand. As on Friday, at least six U.S. states reporting omicron variant cases and the 7-day average of new U.S. Covid infections climbing to a 1-3/4 month high on Thursday.  Israel and Japan have already announced that they will close their borders to new foreign arrivals, and other countries have also announced travel restrictions.  Germany on Thursday imposed strict curbs that will only allow people who are vaccinated or recovered from Covid into restaurants, theaters, and non-essential stores.

However, Crude prices are supported as still Iranian crude to remain out of the global market as the Iranian nuclear talks drag on. 

Also, OPEC+ put a clause into the agreement to raise crude output by 400,000 bpd in January, saying they could revisit the decision to raise production at any time as the risk to energy demand from the omicron Covid variant becomes clearer.

Active oil rigs in the United States have climbed substantially from a 15-year low of 172 rigs last August, indicating an increase in crude oil production capacity in the United States. Baker Hughes announced on Friday that the number of active U.S. oil rigs in the week ending December 3 remained constant at 467, a 19-month high.

On November 26, US crude oil stockpiles were -6.4 percent lower than the seasonal 5-year average, gasoline inventories were -5.2 percent lower, and distillate inventories were -8.2 percent lower than the seasonal 5-year normal. Crude oil production in the United States increased by 0.9 percent week over week to 11.6 million barrels per day, down -1.5 million barrels per day (-11.5 percent) from the record high of 13.1 million barrels per day reached in February 2020.

Fears about an increase in covid-19 infection around the world, as well as the quick spread of a new form known as 'omicron,' are likely to keep WTI crude oil prices under pressure. It is projected to encounter tough resistance about $69.50-$72, while immediate support can be found near $66.50-$66.

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