Oil & Gas - Energy - Commodities - Resources (OILBRENT)

[DiscoverGold]

Peek Into Crude Oil Future Through Futures

* October 1, 2016

The following are futures positions of non-commercials as of September 27, 2016.

Crude oil: OPEC commits itself to cutting output to between 32.5 million barrels per day and 33 mb/d. In August, the cartel produced 33.24 mb/d. The last time the 14-member group, with a little over one-third market share globally, cut production was during the financial crisis in 2008. Shows how much the producers, including Saudi Arabia, are hurting.

In the grand scheme of things, fundamentally this is not that big of a cut, given the prevailing oil glut. Also on Wednesday, but before the OPEC decision, the International Energy Agency said it did not see the oil market rebalancing until late 2017.

That said, OPEC’s decision speaks of the producing nations’ intent – that they are willing to compromise. Saudi Arabia in particular, which produced a record 10.673 million barrels per day in July, is capitulating. There are no details yet on how the cuts will be implemented – a potential source of discord later. Iran in particular seems to be targeting pre-sanction market share not just four mb/d.

When it is all said and done, this may prove to be a life line for U.S. shale oil, which then means glut persists, precisely what OPEC is trying to avoid. Time will tell.

Be that as it may, it was enough of a catalyst for traders to push up spot West Texas Intermediate crude 5.3 percent on Wednesday – past the August 19th declining trend line – and then another 2.5 percent in the next two sessions. The 50-day moving average has been recaptured.

A bigger hurdle lies around $48/barrel, which approximates the declining trend line drawn from the May 2015 high of $62.58. The spot ended the week right on that resistance.

On a related note, mid-September short interest on XLE, the SPDR energy ETF, surged 38 percent period-over-period. These shorts probably got squeezed, leading to the 5.7-percent surge on Wednesday through Friday. The ETF closed the week at $70.61 – right at resistance, which goes back to March 2011.

Trader sentiment on Wednesday was also helped by the EIA data.

In the week ended September 23, U.S. crude stocks fell by 1.9 million barrels to 502.7 million barrels – the lowest since February 5 this year.

Distillate stocks dropped by the same amount to 163.1 million barrels. The prior week was the highest since January 8 this year.

Gasoline stocks, however, rose by two million barrels to 227.2 million barrels. The prior week was the lowest since December 25 last year.

Crude imports fell by 474,000 b/d to 7.8 mb/d.

Crude production declined 15,000 b/d to 8.5 mb/d. Production peaked at 9.61 mb/d in the June 5th week last year.

Refinery utilization stood at 90.1 percent, down from 92 percent. This was a 17-week low.

Currently net long 309.4k, up 29.3k.



http://www.hedgopia.com/cot-peek-into-future-through-futures-63/

• DiscoverGold

Click on "In reply to", for Authors past commentaries