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

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Peek Into Crude Oil Future Through Futures

* February 27, 2016

The following are futures positions of non-commercials as of February 23, 2016. Change is week-over-week.

Crude oil: Well, that did not take long. Iran poured cold water on hopes of a mega deal to cut production. Its oil minister apparently said the production freeze is “a joke,” because it does not allow that nation to regain its production share lost during the sanctions.

Last week, OPEC bigwig Saudi Arabia along with fellow members Qatar and Venezuela agreed with non-OPEC Russia to freeze output at January levels, which were near record highs. The market is already oversupplied by an estimated one million to two million barrels a day. They need a cut, not a freeze. This week, S. Arabia ruled out production cuts.

No wonder, the IEA says “…in the short term there is unlikely to be a significant increase in prices,” adding that the current glut of cheap oil will keep prices low into next year at least.

The IEA also said U.S. shale oil production could fall by 600,000 barrels per day this year and another 200,000 bpd in 2017.

In fact, from the peak, U.S. production has already declined by 500,000 bpd. Production reached a record 9.61 mb/d in the June 5th (2015) week. For the week ended February 19th, production fell 33,000 b/d to 9.1 mb/d. For some perspective, production has doubled in the past decade.

Secondly, if the afore-mentioned freeze is implemented and production does come down, helping oil price stabilize, it is very possible that a lot of U.S. shale production that would otherwise shut off survives. How that would impact the glut situation is anyone’s guess.

For the week ended February 19th, U.S. crude stocks jumped another 3.5 million barrels, to a new record 507.6 million barrels.

Stocks jumped despite crude imports dropping 117,000 b/d to 7.8 mpd. Imports have dropped by 454,000 b/d in the past four weeks.

Refinery utilization fell one percentage point to 87.3. Utilization peaked at 96.1 percent in the August 7th (2015) week.

Gasoline and distillate stocks had something good to report. Both fell – the former by 2.2 million barrels to 256.5 million barrels (prior week was a record), and the latter by 1.7 million barrels to 160.7 million barrels.

Non-commercials raised net longs by 35 percent. This was the largest week-over-week increase since October 2010. Spot West Texas Intermediate crude rallied nearly 11 percent in the week, and was up 16.7 percent at one time. Friday, it could not hang on to early gains. Once again, resistance at $34-$34.50 came on the way. Daily indicators are now overbought.

Currently net long 206.7k, up 53.9k.



http://www.hedgopia.com/cot-peek-into-future-through-futures-32/

• George.

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