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Speculative Funds Continue to Move Towards Short Side of Crude Oil

Speculative funds have continued to move towards the short side of crude oil markets, analysts at Standard Chartered noted in a new report sent to Rigzone this week. “Money-manager shorts across the four main Brent and WTI contracts rose week on week by 31.7 million barrels to 209.5 million barrels in the latest positioning data, while money-manager longs fell by 16.0 million barrels to 456.4 million barrels,” the analysts stated in the report.

The reduction in the crude oil net long over the past six weeks has been 258.3 million barrels, the analysts highlighted in the report. They pointed out that this is the largest six-week move of money-manager funds to the short side since early March 2020 “at the start of the pandemic”.

“Long-short ratio indicators tell a similar story, with the ratio in the Chicago Mercantile Exchange (CME) WTI contract falling to 2.0 in the latest data, a sharp fall from 11.4 six weeks ago,” the analysts said in the report. “The main theme that emerges among money managers as their motivation for such a large move to the short side is a fear of future extreme demand weakness,” they added. “We think the dynamic behind current speculative flows is a reoccurrence of the macro-led concerns – about the U.S. and China economies in particular – that temporarily took Brent below $72 per barrel in May this year,” they continued. “Speculative net selling was a little slower in May (the six-week rate peaked at 231.6 million barrels, 10 percent less than over the past six weeks). However, the narrative among speculative traders of weakening demand conditions seems very similar,” they went on to state. In the report, the analysts noted that a few supply strands have attached themselves to the main demand weakness concerns. “However, most of them seem to be confusion about seasonality and the relationship between exports and production,” they said in the report. In the report, the analysts noted that a few supply strands have attached themselves to the main demand weakness concerns. “However, most of them seem to be confusion about seasonality and the relationship between exports and production,” they said in the report. The scale of the current speculative move in oil is not justified by fundamental data, the Standard Chartered analysts stated in the report. “Our supply and demand model shows global demand rising 2.02 million barrels per day year on year in October and we forecast demand growth will stay above 1.5 million barrels per day in November, December, and January, with our forecast for 2024 growth at 1.5 million barrels per day,” they continued.

The analysts outlined in the report that, in their view, the latest monthly reports from the main oil balance agencies “also lend little support to the speculative-led plunge in prices”.

“Forecasts for 2024 demand growth were little changed; the International Energy Agency (IEA) forecast increased 50,000 barrels per day to 930,000 barrels per day, the OPEC Secretariat forecast was unchanged at 2.246 million barrels per day and the Energy Information Administration (EIA) forecast increased 81,000 barrels per day to 1.393 million barrels per day,” they noted in the report. “All three agencies increased their 2023 and 2024 forecasts of absolute oil demand in both years, and all increased their Q4-2024 demand forecast,” they added. “The only split came in views of demand in Q3-2023, with respective increases of 330,000 barrels per day and 201,000 barrels per day in the EIA and EIA estimates, but a decrease of 64,000 barrels per day in the OPEC Secretariat estimate,” the analysts continued. The Standard Chartered analysts stated in the report that the extreme demand pessimism the oil market showed in May proved to be unfounded and added that the “speculative led undershoot in prices provided the base for a rally that extended to over $25 per barrel before the macro-led gloom descended again”.

“We think the current price weakness is also a significant undershoot,” they said in the report.

“The scale of speculative selling, the collapse in the long-short ratio, and the media and trader concentration on supposed demand weakness are the same now as in May, and we think the price rebound is likely to be similar,” they added. n the report, Standard Chartered projects that, in the first quarter of 2024, the ICE Brent price will average $92 per barrel and the NYMEX WTI price will average $89 per barrel. Overall in 2024, the company expects the ICE Brent price to average $98 per barrel and the NYMEX WTI price to average $95 per barrel. NN: this is a $20 rise om the current price just on the demand fundamentals. Add OPEC partial embargo soon to  be announced and you can see why i expect oil over $120 a barrel. And for more fun add a rocket from Lebanon or Yemen taking out a major building in Tel Aviv and you got $200 oil.

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OPEC Said To Consider Additional 1 Million Bpd Output Cut

“You should not underestimate the level of anger there is and the pressure leaders in the Gulf feel from their populations to be seen to respond in some manner,”

 

Two days ago, JPMorgan’s head of energy strategy Christyan Malek warned that amid the recent plunge in oil prices, driven as much by shorting CTAs (who today are in full-blown short squeeze panic mode) as the Biden admin,

The oil market is underestimating the chances of deeper supply cuts during this month’s Nov 26 OPEC+ meeting.

“The market’s probably assuming very little chance of that happening, I’d say it’s much higher than that – not as a base case but as a scenario” Malek told Bloomberg in an interview, adding that deeper curbs would be

 “in order to get ahead of potential weakness in the first half of next year.” “We may need to see” a cut “given where the balances are, particularly given the demand trending.” 

And while “there’s a view that Saudi is tapped out”, Malek said that he doesn’t believe that: “I think there’s more flex if they wish to cut. We could see them do sizable cuts from here; having said that, I think it’s more likely they’ll want to socialize them among their OPEC peers – a collective cut rather than one on their own.”

 Opec+ is weighing further reductions  (in oil production) in response to falling prices and rising anger over the Israel-Hamas war.

While OPEC+ is not getting directly involved in the Gaza war, it certainly did not expect the Biden oil trading desk to hammer oil as hard as it did. If anything, it was expecting oil prices to rise above $100. Or as the FT puts it,

“an additional Opec+ cut of up to 1mn b/d could be on the table, one informed person said, describing the cartel as “galvanised” by the conflict.”

Naturally, the further cuts – which are under discussion by Opec+ as it prepares to meet in Vienna on November 26 – could further inflame tensions with the US, although it appears that nobody in the cartel is even remotely worried about angering the senile US president who just got schooled by “dictator” Xi Jinping during his recent tour of China’s California colony. There’s more: Opec+ is clearly not happy that the US is so openly on the side of Israel in the Gaza conflict. And while the oil price drop is the main cause, “members are also indignant at Israel’s war on Hamas and the humanitarian crisis in Gaza” the FT reports, adding that “Kuwait, Algeria and Iran are among the Opec members most agitated by the conflict.”

“You should not underestimate the level of anger there is and the pressure leaders in the Gulf feel from their populations to be seen to respond in some manner,”

 said another person close to senior Opec figures in the Gulf, effectively confirming that an Opec+ production cut would directly target Biden’s policies meant to keep the price of oil (and gas) as low as possible into the 2024 election.

The person said there would be no repeat of the oil shock of the 1970s, when Arab states halted exports to the west. But they added:

 “People have become complacent about the potential to tighten oil supplies to send a subtle message, which will be well understood both in the streets and Washington DC.”

If Opec+ can send oil prices soaring again, then Biden is completely finished. Prince Abdulaziz recently hit out at hedge funds that have increased their bets against oil.  It’s not just Saudis that want oil as high as possible: Russia depends heavily on oil to finance its invasion of Ukraine, and has been increasing seaborne exports in recent months. However, if it means boosting oil prices, even Putin would be willing to seek a sharp if brief production cut, just enough to spark a worldwide energy panic. The economic reform program of Prince Abdulaziz’s half-brother, Crown Prince Mohammed bin Salman requires an oil price close to $100 a barrel: the plan ranges from building hypermodern cities to hosting the 2034 football World Cup. BlackMask Pod Cast:

Warning Oil is About TO SOAR

 

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Iran is ‘testing the waters on how far to provoke the US’ expert sends horror warning

Iran could “test the waters as to how far they could provoke the US“, an expert has warned, while also tearing apart Joe Biden for “sending a message of weakness” as tensions between Tehran and the US skyrocket. Since the on Israel that killed 1,200 people on October 7, Iran’s support for Hamas has come into sharp focus with its proxy group Hezbollah now also heavily involved in the conflict, launching missile strikes at Israeli targets. Iranian Supreme Leader Ali Khamenei denied his country was involved in the Hamas bombardment of Israel, but during a speech last month, said: “America is a definite accomplice of criminals. The United States is in some way directing the crime that is being committed in Gaza.” During recent weeks, Iran-backed militias have launched a string of missile attacks against US bases in Syria, with American forces conducting air strikes of their own on sites believed to be used by Iranian troops.

Nile Gardiner, a Washington-based foreign policy expert, warned that while Iran is already heavily involved in the Israel-Hamas war, it could try to test the patience of the US in a move that could see already volatile tensions completely explode.

He warned “Iran is heavily involved in the Israel conflict in terms of their support for both Hamas and Hezbollah, as well as their use of proxy groups in Iraq, Syria and Yemen. Iran is therefore already up to their necks in terms of involvement. “But what the Iranian regime could do is test the waters as to how far they could provoke the US.”

“It’s therefore only a matter of time before Iran significantly ramps up its attacks on US bases, personnel, and interests.”

Last month, the US built a massive military presence in the Middle East with the aim of sending a strong message to Iran to stay out of the Israel-Hamas war. The Pentagon placed around 2,000 troops in a state of readiness and deployed the USS Gerald R. Ford – the world’s largest warship that can ferry 75 aircraft – to the Eastern Mediterranean, as Israel prepared to launch a ground invasion into Gaza as But Mr Gardiner claimed the Biden administration has not gone far enough to deter Iran, accusing the president of “sending a message of weakness”. He continued: “The unfortunate situation is the Biden administration has not really responded in any strong fashion to attacks on US bases and servicemen in the Middle East by Iranian proxy groups, so this sends a message of weakness. “The Biden administration, against Iran, has launched very limited military operations and hasn’t really done anything. “If Donald Trump was president, he would have already struck directly against Iranian interests, as he did during his time in the White House.

“Weakness invites more aggression and I suspect that Iranian regime views Biden as weak, so they will test the waters further.”

“The Biden administration, against Iran, has launched very limited military operations and hasn’t really done anything. “If Donald Trump was president, he would have already struck directly against Iranian interests, as he did during his time in the White House. NN: Biden (Chamberlain) is courting disaster. Any regime capable of such barbarianism obviously would regard US bombing pf empty warehouses as  sign the US has lost its will to fight. On the other hand a Trump administration with all its warts and pimples (Churchill) is one to be feared.

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Goldman Sachs Sees OPEC Keeping Oil In $80-$100 Price Range

Last weekend, the Saudi government reiterated its commitment to voluntary crude output cuts of 1 million barrels a day, saying that they would continue until at least the end of the year.

Goldman Sachs expects OPEC to not let oil prices slide too much below $80 per barrel next year and use its pricing power to keep them in the $80-$100 range, the bank said in a note this week, ahead of the OPEC+ meeting on November 26. Oil prices dived this week to their lowest level since July as market participants focused on concerns about the world’s two biggest economies—the United States and China. Goldman Sachs believes that OPEC will use its production policy to keep prices in the $80-$100 range. “We believe that OPEC [Organization of the Petroleum Exporting Countries] will ensure Brent in a $80-$100 range by leveraging its pricing power, with a $80 floor from the OPEC put, and a $100 ceiling from spare capacity,” Goldman Sachs’ commodities analysts led by Daan Struyven wrote in a note to clients, as carried by MarketWatch.

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Oil prices fall further, WTI drops 5% on demand woes

Crude prices declined further on Thursday touching their lowest value in three months as concerns about the oil demand appeared to grow after the latest data showed that industrial production in the United States slowed more than expected in October. The Energy Information Administration previously revealed an oil inventory build-up in the United States, with the steep rise in crude inventories seemingly fueling worries about weakening commodity consumption in the country. The West Texas Intermediate (WTI) for December deliveries tumbled 5.04% to sell at $72.80 per barrel at 12:40 pm ET. Brent for January contracts plummeted 4.79% to trade at $77.25 a barrel. Both benchmarks dropped to their lowest levels not seen since mid-July. NN: In my opinion six months from now oil at these prices will be regarded as the bargain of the century

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Yemen’s Houthis say they launched ballistic missiles on Israeli military targets

Yemen’s Houthi rebel group said on Tuesday evening that its forces launched a barrage of ballistic missiles toward the Israeli southern city of Eilat. “The operations of the Yemeni armed forces against the ‘Israeli’ enemy will not stop until the ‘Israeli’ aggression on our brothers in Gaza ceases,” the group stressed in a post on one of its Telegram channels. “This comes only 24 hours after another military operation carried out by our armed forces with drones on the same targets,” the statement read. Israel previously said that a missile was intercepted over the Red Sea, adding that the rocket did not cross into the Israeli territory. Houthi movement leader Abdul-Malik al-Houthi warned that its forces will continue to attack Israeli ships in the Red Sea.

 Yemen’s Houthi have launched a batch of ballistic missiles on various Israel targets, including sensitive ones in Israel’s Eilat, the group’s military spokesperson said on Tuesday. The launch came “after 24 hours of another military operation by drones on the same Israeli targets,” the spokesperson added. The spokesperson said that the group “will not hesitate to target any Israeli ship in the Red Sea or at any other place” the group could reach.

 

 

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Unwarranted Demand Pessimism Could Lead to a Big Oil Price Rally

  • Oil prices fell to their lowest level since July last week.
  • Money-manager shorts across the four main Brent and WTI contracts rose w/w by 31.7 mb to 209.5 mb in the latest positioning data.
  • Standard Chartered: the current price weakness is a significant undershoot, and oil markets may soon record a big rally comparable to the May bull run.

Last week, oil prices logged a third straight weekly decline, sinking to the lowest level since mid-July as concerns about demand continue to replace the fear of production outages related to the Middle East conflict. Oil markets have been experiencing a shift in sentiment, with a significant decline in speculative buying also putting pressure on prices.  According to commodity analysts at Standard Chartered, the shorts have returned to the oil markets with a vengeance. Money-manager shorts across the four main Brent and WTI contracts rose w/w by 31.7 mb to 209.5 mb in the latest positioning data, while money-manager longs fell by 16.0 mb to 456.4 mb. In contrast, the volume of long positions in crude oil has decreased due to macroeconomic fears overshadowing traditional supply and demand factors. The long-short ratio in the Chicago Mercantile Exchange (CME) WTI contract has fallen to 2.0 in the latest data, a sharp decline from 11.4 six weeks ago. According to StanChart, concerns about weakening demand stem from confusion about seasonality and the relationship between exports and production. The analysts note that demand for air conditioning in the Middle East is lower now since the northern hemisphere summer is over, which has freed up higher volumes for export. Traders and speculators are [incorrectly] interpreting this increase in export availability as being indicative of higher supply and a loss of producer discipline. However, the analysts say that the scale of the current speculative move in oil is not justified by fundamental data. For one, India’s oil demand remains robust, climbing 211 kb/d in October to 5.004 million barrels per day (mb/d). Diesel demand was particularly strong, rising 9.3% y/y to 1.88 mb/d, while gasoline demand was up 4.8% y/y to 861kb/d. StanChart’s proprietary demand model shows global demand rising 2.02 mb/d y/y in October and have forecast demand growth will stay above 1.5 mb/d in November, December and January, while 2024 growth is likely to clock in at 1.5 mb/d. Good news for the oil bulls: StanChart notes that the extreme demand pessimism in the oil market back in May proved to be unfounded, and the undershoot in prices laid the ground for a rally that extended to over USD 25/bbl. The analysts have argued that the current price weakness is also a significant undershoot, and oil markets may soon record a big rally comparable to the May bull run. The strong demand growth being recorded in India might not be a fluke. Several analysts have predicted that India will replace China as the main driver of global oil demand growth in the near future. A rapidly growing population, which has likely surpassed China’s, is expected to be the main driver of consumption trends in India. Meanwhile, the country’s transition from traditional gasoline and diesel-fueled transport is expected to lag other regions, in sharp contrast to China’s skyrocketing adoption of electric vehicles and clean energy in general. China’s adoption of electric vehicles has been lightning fast, a trend that does not bode well for gasoline demand in the world’s biggest car market. EV sales in China nearly doubled to 6.1 million units in 2022, compared with just 48,000 units sold in  India, according to BloombergNEF. BNEF has revealed that EVs are already displacing over 1.4 million barrels a day of oil use globally.  On its part, India is in no hurry to ditch traditional fossil fuels. Earlier in the year, India’s coal minister Pralhad Joshi announced that coal will continue to play an important role in the country’s energy sector until at least 2040, referring to the fuel as an affordable source of energy for which demand has yet to peak in India. “Thus, no transition away from coal is happening in the foreseeable future in India,” Joshi said, adding the fuel will continue to play a big role until 2040 and beyond. However, India is unlikely to replicate the mammoth scale of China’s expansive oil network any time soon, with the latter currently consuming three times as much oil. India’s oil consumption grew by ~255,000 barrels per day (bpd) during the first seven months of the current year, helping to grow total consumption to 135 million metric tons in the first seven months of 2023 compared to 128 million metric tons for last year’s corresponding period. However, that growth clip was considerably slower than 415,000 bpd posted in 2021/22 as economies rebounded from the coronavirus pandemic and lockdowns.

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U.S. to Tighten Sanctions on Iran’s Oil Industry Amid Israel-Hamas War

The United States will tighten sanctions on Iran’s oil industry amid the Israel-Hamas conflict aiming to bring exports down by more than 1 million bpd, White House energy security adviser Amos Hochstein told Bloomberg. “We are going to enforce those sanctions,” Hochstein said. “Those numbers will come down.”

Talk about tighter sanctions against Iran’s oil industry intensified in the wake of the latest war in the Middle East with hawks in Congress blaming Iran of helping plan the Hamas attacks and advising pre-emptive action against Tehran before it became more involved in the conflict.

Tehran has denied any involvement in the Hamas attacks on Israel that ignited the war. At the same time it has repeatedly warned that the violence will escalate. “If the Zionist aggressions do not stop, the hands of all parties in the region are on the trigger,” Foreign Minister Hossein Amirabdollahian said last month. Meanwhile, Congress recently passed legislation aimed at entities helping Iran export its oil. Dubbed the SHIP bill (Stop Harboring Iranian Petroleum) would sanction foreign ports and refineries processing Iranian petroleum illicitly exported. The bill requires passage by the Senate and presidential signing to become law. The bill “sends a clear and strong message to bad actors like China, Russia, and others – do not help Iran avoid sanctions and assist them in their funding of terror, or face the consequences,” one Republican representative said, as quoted by Reuters, at the time. There are also other bills that U.S. legislators are discussing, all aimed at pressuring Iran. Iranian oil exports declined for the second consecutive month in October, with the country loading 1.43 million barrels per day of crude and condensate, Bloomberg reported earlier this month, citing TankerTrackers.com data. The volume loaded for export in October was 194,000 bpd lower than September and reportedly the lowest export-loading volume since July. NN: Do you really believe this conflict will stay contained in Gaza?

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Over 20 rockets fired from Lebanon toward Israel, IDF strikes Hezbollah

Over 20 rockets were fired from Lebanon toward Kiryat Shmona, Matat, Shlomit, and other areas along the Lebanese-Israeli border on Wednesday, according to the IDF Spokesperson’s Unit. Hezbollah took responsibility for the rocket fire toward Kiryat Shmona. The IDF responded to the rocket fire with artillery fire targeting several sites in southern Lebanon, including a Hezbollah observation point. Hezbollah additionally stated that it targeted an IDF post along the border near Mount Dov, another post near Yir’on, another post near Meiss al-Jabal, another post near Rmaych, and an additional post near Boustane on Wednesday afternoon and evening. The IDF has not confirmed the reports as of yet. Lebanese Foreign Minister Abdullah Bou Habib met with Iran’s ambassador in Lebanon Mojtaba Amani on Wednesday, telling him that “Israel is not defending itself today, but rather its obsession is blind revenge.” On Wednesday, UNIFIL commander Aroldo Lázaro briefed representatives of countries that provided troops for the peacekeeping mission about the situation in southern Lebanon. On Tuesday, Lázaro met with Lebanese Speaker of Parliament Nabih Berri and caretaker Prime Minister Najib Mikati, expressing his “deep concern” about the situation in southern Lebanon. NN: As you know my opinion is its only a matter of time until the battle with Lebanon and Syria rages. Every day the number of attacks on Israel increases.

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Hamas ‘plan on attacking Israel again’: Joe Biden…. Biden sets no time limits for Israel-Hamas conflict

US President Joe Biden says Hamas “plan on attacking Israel again” and it is “not realistic” they will stop after Israel entered the largest hospital in Gaza which housed Hamas command centres. Israeli troops launched an operation on Gaza’s Al-Shifa Hospital on Wednesday, which Israel said sits on a large network of tunnels, where they have found weapons and other terrorist infrastructure.

“Hamas has already said publicly that they plan on attacking Israel again, like they did before, cutting off babies heads and burning women and children alive,” Mr Biden told a press conference in San Francisco on Wednesday (local time). “

The idea that they’re going to just stop and not do anything is unrealistic. “This is not a carpet bombing, it’s a different thing – they are going … into the hospital through tunnels.”

Biden sets no time limits for Israel-Hamas conflict

United States President Joe Biden said he “does not know” how long the conflict between Israel and Hamas is going to last. “I think it’s going to stop when Hamas no longer maintains the capacity to murder, abuse and do horrific things to the Israelis,” he told reporters. Biden said that the Israel Defense Forces (IDF) “acknowledge they have an obligation to use as much caution as they can in going after their targets” while occupying hospitals in Gaza. He claimed that “one thing that has been established is that Hamas does have headquarters, weapons, material below [the Al-Shifa] hospital and I suspect others.” He added that he is “mildly hopeful” about the prospect of liberating hostages held by Hamas. NN: You need to take a deep breath here and realize the simmering cauldron the global conflict a clash of civilizations is  about to boil over.