Analys

Get me out of my long WTI June position!!!!

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5 år sedan

den

22 april, 2020

Redaktionen

Right now, we have a “467 million barrels of financial “get me out of here” taking place in the WTI June contract. After seeing what happened to the WTI May contract on Monday (traded down to minus $40/bl) most everyone with a long position in the WTI June contract are now most likely heading for the door if they can. This is the burning down of long oil ETFs which are holding the lion’s share of the long positions in the WTI June contract. Yesterday there was an exit of 115 million barrels from the June contract leaving 467 million barrels to go. The intense sell-off in the WTI June contract is dragging down the Brent June contract.

Bjarne Schieldrop, Chief analyst commodities at SEB — Bjarne Schieldrop, Chief analyst commodities, SEB

Most ETF’s have very strict rules describing how they should place investors money. Mostly it is placed in the first or the second contract and rolled forward according to explicit rules as time passes. I.e. the ETF’s are mostly rule-based, and it doesn’t matter what the managers of the oil ETFs think about oil one way or the other.

The next major roll from June to July is from May 5 to 8. The biggest of these ETFs, The US Oil fund (USO) has now however decided to change its rules and fully exit the WTI June contract of which it held 137 million barrels of on Monday.

Monday’s price event in the WTI May contract shocked the market into understanding what can/will happen to oil prices the moment inventories reach capacity: Price collapse. Not necessarily down to negative prices as we saw on Monday, but definitely price collapse.

WTI and Brent crude oil prices are much more strongly tied together a little bit out on the curve like June. As investors are now fleeing the WTI June contract with an intense selling pressure as a result this selling pressure is rubbing off on the Brent June contract as well. Much more so than when the selling pressure was focused on the May WTI contract at the very front of the curve as was the case on Monday. But now the Brent June is dragged down along with the WTI June contract.

The Brent contract is however not at all land-locked in the same way as the WTI contract which is price off the inland point of Cushing Oklahoma. Physical Brent crude can easily flow across the world and utilize any remaining opening in storage capacity. Either onshore or floating.

The Brent crude oil benchmark is thus much less vulnerable for the kind of events which unfolded on Monday for the WTI May contract. Inventories are none the less filling up around the world. Very Large Crude Carriers (VLCCs) are reported to sail around at sea with no buyers carrying crude from Saudi Arabia. So even the seaborne market is starting to saturate, and it is gradually becoming more difficult to even place Brent crude cargoes into the seaborne market. As a reflection of this Saudi Arabia is now discounting its oil versus both Brent crude and the Dubai crude marker at the steepest discount ever.

A lot of the remaining open position in the WTI June contract is held by long oil ETFs which cannot exit at free will and have to follow explicit rolling rules. Thus, we won’t get an all-out exit of the remaining 467 million barrels of open positions right away. But investors holding these ETFs can take exit and force the ETFs to take exit from the WTI June contract.

Brent crude for average delivery in 2021 traded all the way down to $34.5/bl today but is now back up at $36/bl again. Our standing recommendation has been to buy oil and oil products for 2021 delivery when these forward prices reach ball-park $35/bl. We still hold that view even if there is definitely going to be more turmoil ahead.

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Stronger inventory build than consensus, diesel demand notable

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2 dagar sedan

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21 februari, 2025

Redaktionen

Yesterday’s US DOE report revealed an increase of 4.6 million barrels in US crude oil inventories for the week ending February 14. This build was slightly higher than the API’s forecast of +3.3 million barrels and compared with a consensus estimate of +3.5 million barrels. As of this week, total US crude inventories stand at 432.5 million barrels – ish 3% below the five-year average for this time of year.

Ole R. Hvalbye, Analyst Commodities, SEB

In addition, gasoline inventories saw a slight decrease of 0.2 million barrels, now about 1% below the five-year average. Diesel inventories decreased by 2.1 million barrels, marking a 12% drop from the five-year average for this period.

Refinery utilization averaged 84.9% of operable capacity, a slight decrease from the previous week. Refinery inputs averaged 15.4 million barrels per day, down by 15 thousand barrels per day from the prior week. Gasoline production decreased to an average of 9.2 million barrels per day, while diesel production increased to 4.7 million barrels per day.

Total products supplied (implied demand) over the last four-week period averaged 20.4 million barrels per day, reflecting a 3.7% increase compared to the same period in 2024. Specifically, motor gasoline demand averaged 8.4 million barrels per day, up by 0.4% year-on-year, and diesel demand averaged 4.3 million barrels per day, showing a strong 14.2% increase compared to last year. Jet fuel demand also rose by 4.3% compared to the same period in 2024.

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Analys

Higher on confidence OPEC+ won’t lift production. Taking little notice of Trump sledgehammer to global free trade

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4 dagar sedan

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19 februari, 2025

Redaktionen

Ticking higher on confidence that OPEC+ won’t lift production in April. Brent crude gained 0.8% yesterday with a close of USD 75.84/b. This morning it is gaining another 0.7% to USD 76.3/b. Signals the latest days that OPEC+ is considering a delay to its planned production increase in April and the following months is probably the most important reason. But we would be surprised if that wasn’t fully anticipated and discounted in the oil price already. News this morning that there are ”green shots” to be seen in the Chinese property market is macro-positive, but industrial metals are not moving. It is naturally to be concerned about the global economic outlook as Donald Trump takes a sledgehammer smashing away at the existing global ”free-trade structure” with signals of 25% tariffs on car imports to the US. The oil price takes little notice of this today though.

Bjarne Schieldrop, Chief analyst commodities, SEB

Kazakhstan CPC crude flows possibly down 30% for months due to damaged CPC pumping station. The Brent price has been in steady decline since mid-January but seems to have found some support around the USD 74/b mark, the low point from Thursday last week. Technically it is inching above the 50dma today with 200dma above at USD 77.64/b. Oil flowing from Kazakhstan on the CPC line may be reduced by 30% until the Krapotkinskaya oil pumping station is repaired. That may take several months says Russia’s Novak. This probably helps to add support to Brent crude today.

The Brent crude 1mth contract with 50dma, 100dma, 200dma and RSI. Nothing on the horizon at the moment which makes us expect any imminent break above USD 80/b

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Analys

Brent looks to US production costs. Taking little notice of Trump-tariffs and Ukraine peace-dealing

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6 dagar sedan

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17 februari, 2025

Redaktionen

Brent crude hardly moved last week taking little notice of neither tariffs nor Ukraine peace-dealing. Brent crude traded up 0.1% last week to USD 74.74/b trading in a range of USD 74.06 – 77.29/b. Fluctuations through the week may have been driven by varying signals from the Putin-Trump peace negotiations over Ukraine. This morning Brent is up 0.4% to USD 75/b. Gain is possibly due to news that a Caspian pipeline pumping station has been hit by a drone with reduced CPC (Kazaksthan) oil flows as a result.

Brent front-month contract rock solid around the USD 75/b mark. The Brent crude price level of around USD 75/b hardly moved an inch week on week. Fear that Trump-tariffs will hurt global economic growth and oil demand growth. No impact. Possibility that a peace deal over Ukraine will lead to increased exports of oil from Russia. No impact. On the latter. Russian oil production at 9 mb/band versus a more normal 10 mb/d and comparably lower exports is NOT due to sanctions by the EU and the US. Russia is part of OPEC+, and its production is aligned with Saudi Arabia at 9 mb/d and the agreement Russia has made with Saudi Arabia and OPEC+ under the Declaration of Cooperation (DoC). Though exports of Russian crude and products has been hampered a little by the new Biden-sanctions on 10 January, but that effect is probably fading by the day as oil flows have a tendency to seep through the sanction barriers over time. A sharp decline in time-spreads is probably a sign of that.

Longer-dated prices zoom in on US cost break-evens with 5yr WTI at USD 63/b and Brent at USD 68-b. Argus reported on Friday that a Kansas City Fed survey last month indicated an average of USD 62/b for average drilling and oil production in the US to be profitable. That is down from USD 64/b last year. In comparison the 5-year (60mth) WTI contract is trading at USD 62.8/b. Right at that level. The survey response also stated that an oil price of sub-USD 70/b won’t be enough over time for the US oil industry to make sufficient profits with decline capex over time with sub-USD 70/b prices. But for now, the WTI 5yr is trading at USD 62.8/b and the Brent crude 5-yr is trading at USD 67.7/b.

Volatility comes in waves. Brent crude 30dma annualized volatility.