- Oil Speculators Can’t Dump Rally Bets Fast Enough Amid Glut
The bullish sentiment following OPEC’s deal is almost all gone.
Hedge funds haven’t been so skeptical on rising West Texas Intermediate crude prices since Nov. 29, the day before the cartel agreed to cut output, according to U.S. Commodity Futures Trading Commission data. Their net-long position, or the difference between bets on a price increase and wagers on a decline, has dropped 37 percent from a record touched last month as American crude production climbed, sending inventories to an all-time high.
“Things trend, and sentiment from the hedge funds has turned bearish,” Mike Wittner, head of commodities research at Societe Generale SA in New York, said by telephone. “People rushed into the market and their patience ran out, so they ran for the exits. They need a strong signal, and that will be U.S. stockpile draws, probably a few in a row, before they return.”
The net-long position on WTI dropped 9.8 percent in the week ended March 21, following a record fall in the previous week, according to the CFTC. WTI dipped 0.8 percent to $47.34 a barrel in the report week. The U.S. benchmark was trading down 0.3 percent at $47.85 as of 12:07 p.m. in Singapore on Monday.
“This is a market that’s very much on the defensive,” Tim Evans, an energy analyst at Citi Futures Perspective in New York, said by telephone. “Although net length is greatly reduced, money managers still have a lot of net length. They still remain vulnerable to further price declines.”
The agreement between the Organization of Petroleum Exporting Countries and 11 non-OPEC producers to cut output for six months starting Jan. 1 helped spur a wave of buying. This optimism has crumbled with the resurgence of U.S. drilling rigs and mounting stockpiles in the world’s biggest crude consumer.
U.S. crude stockpiles rose to 533.1 million barrels in the week ended March 17, the highest in weekly data going back to 1982, according to an Energy Information Administration data. Production climbed to 9.13 million barrels a day, the highest since February 2016. The nation’s active oil-rig count has more than doubled since May to 652 last week, according to Baker Hughes.
“The whole market is fixated on U.S. inventories,” Rob Thummel, a managing director and portfolio manager at Tortoise Capital Advisors LLC who helps manage $17.2 billion, said in an interview. “We should start to see them fall as early as early April. When we see that, prices will move back into the $50s.”
The net-long position fell by 28,197 futures and options to 260,577. Longs slipped 4 percent, while shorts advanced 13 percent.
Part of the glut in U.S. stockpiles stems from a surge in imports last month. Arrivals into the country reached the highest level in more than four years in the week ended Feb. 3 as barrels that were pumped before OPEC and its partners made cuts arrived at U.S. ports. These shipments will probably slip in the week’s ahead, according to Thummel.
“Lower OPEC imports and the ending of refinery maintenance will reduce inventories eventually,” Thummel said.
U.S. refineries typically increase activity in April as they finish maintenance before the summer peak driving season. Crude processing volumes have increased in the second quarter in each year in EIA data going back to 1989.
“Rising inventories are temporary headwinds,” Mark Watkins, the Park City, Utah-based regional investment manager for the Private Client Group at U.S. Bank, which oversees $136 billion in assets, said by telephone. “We’re anticipating strong future demand growth, and with the summer driving season inventories will start to decline.”
OPEC Agrees to Increase Oil Supply by 500,000 Barrels Per Day Ahead of Surge in Demand
OPEC and allies finally agreed to ease their 7.7 million barrels per day production cut by 500,000 barrels per day starting from January 2021.
This will now bring the oil cartel’s total production cuts to 7.2 million barrels per day starting from next year.
Oil prices rose after the news as the market believed the approval of Pfizer COVID-19 in the United Kingdom will kick start a series of approvals and helped restore confidence, increase business activities and demand for the commodity across the globe.
After the outcome of the meeting was made public on Thursday, Brent Crude Oil against which Nigerian oil is priced gained 1.35 percent on Friday after gaining 1.4 percent on Thursday to $49.37 per barrel at 11.35 am Nigerian time on Friday.
The US West Texas Intermediate gained 1.29 percent to $46.23 barrel on Friday.
“500,000 bpd from January is not the nightmare scenario that the market feared, but it is not what was really expected weeks ago,” said Rystad Energy senior oil markets analyst Paola Rodriguez Masiu. “Markets are now reacting positively and prices are recording a small increase as 500,000 of extra supply is not deadly for balances,” she added.
Investors King increased business sentiment in the energy sector to boost investment, increase activity in the sector and most important improve crude oil demand enough to accommodate the 500,000 barrels per day extra that would be hitting the global market starting from January.
Communities in Delta State Shut OML30 Operates by Heritage Energy Operational Services Ltd
The OML30 operated by Heritage Energy Operational Services Limited in Delta State has been shut down by the host communities for failing to meet its obligations to the 112 host communities.
The host communities, led by its Management Committee/President Generals, had accused the company of gross indifference and failure in its obligations to the host communities despite several meetings and calls to ensure a peaceful resolution.
The station with a production capacity of 80,000 barrels per day and eight flow stations operates within the Ughelli area of Delta State.
The host communities specifically accused HEOSL of failure to pay the GMOU fund for the last two years despite mediation by the Delta State Government on May 18, 2020.
Also, the host communities accused HEOSL of ‘total stoppage of scholarship award and payment to host communities since 2016’.
The Chairman, Dr Harrison Oboghor and Secretary, Mr Ibuje Joseph that led the OML30 host communities explained to journalists on Monday that the host communities had resolved not to backpedal until all their demands were met.
Crude Oil Recovers from 4 Percent Decline as Joe Biden Wins
Oil Prices Recover from 4 Percent Decline as Joe Biden Wins
Crude oil prices rose with other financial markets on Monday following a 4 percent decline on Friday.
This was after Joe Biden, the former Vice-President and now the President-elect won the race to the White House.
Global benchmark oil, Brent crude oil, gained $1.06 or 2.7 percent to $40.51 per barrel on Monday while the U.S West Texas Intermediate crude oil gained $1.07 or 2.9 percent to $38.21 per barrel.
On Friday, Brent crude oil declined by 4 percent as global uncertainty surged amid unclear US election and a series of negative comments from President Trump. However, on Saturday when it became clear that Joe Biden has won, global financial markets rebounded in anticipation of additional stimulus given Biden’s position on economic growth and recovery.
“Trading this morning has a risk-on flavor, reflecting increasing confidence that Joe Biden will occupy the White House, but the Republican Party will retain control of the Senate,” Michael McCarthy, chief market strategist at CMC Markets in Sydney.
“The outcome is ideal from a market point of view. Neither party controls the Congress, so both trade wars and higher taxes are largely off the agenda.”
The president-elect and his team are now working on mitigating the risk of COVID-19, grow the world’s largest economy by protecting small businesses and the middle class that is the backbone of the American economy.
“There will be some repercussions further down the road,” said OCBC’s economist Howie Lee, raising the possibility of lockdowns in the United States under Biden.
“Either you’re crimping energy demand or consumption behavior.”
Nigeria’s Annual Remittance Inflow Estimated at $24 Billion -CBN
Nigerians to Start Receiving Remittance Inflows in Foreign Currency Today
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