Quotations of futures for the North Sea variety managed to push off from the three-week lows thanks to Saudi Arabia’s announcement of an unprecedented decline in exports. Riyadh is ready to reduce the supply of black gold in November to 7.2 million bpd, which is significantly lower than the demand for it which is at 7.7 million bpd. Investors digested the information for a long time, considering which is the more significant factor. Is it the growth in exports since September which is 6.7 million bpd, or is it the decline since the beginning of the year which is 7.8 million bpd in January and from the level of average values of the indicator in 2012-2016 which is 8.2 million bpd in November 2016? The mind eventually won and prices slowly crept up but for how long?
If there is not enough oil in one place, then there is a lot of need for oil in it. This leads to the growth of Brent, the expansion of its differential with WTI, and the increase in US exports. By prohibiting the supply of black gold abroad for 40 years, the United States was able to bring the price to a record value of almost 2 million bpd by autumn. They openly oppose OPEC in the market and the cartel’s general secretary, Mohammed Barkindo, can only appeal to American producers to join the Vienna agreement, reduce production, and balance the market. According to OPEC estimates, global black gold reserves currently exceed the average for 5 years by about 145 million barrels.
It is very doubtful that the head of a cartel will hear someone in North America. Most likely, the quotations of Brent and WTI reached their extremes at the end of September and are currently trying to determine the lower limit of the long-term consolidation range. At least hedge funds began to gradually wind down the net longs for the North Sea variety. At the end of the week of October 3, they fell 0.9% to 504263 contracts while the Texas one fell by 1%, to 249323 contracts.
Dynamics of speculative net positions on Brent and WTI
Source: Bloomberg.
The pressure on oil is caused by the expectations of Hurricane Nate hitting the coast of the Gulf of Mexico. The drop in demand for black gold from the refinery is a “bearish” factor for it since it allows us to count on the growth of reserves. So far, according to polls of Bloomberg experts, the volume of reserves will be reduced by 750 thousand barrels as per the results of the week ending on October 6.
Support for Brent and WTI is seen to weaken the US dollar ahead of the publication of the September FOMC meeting. The futures market estimates the chances of an increase in the rate for federal funds in December at 88%. There is still a lot of time until the last meeting of the Fed for the current year. Anything can happen, including a fall in the likelihood of the third act of monetary restriction in 2017. In such circumstances, speculators prefer to reinsure and reduce the size of their long lines in the US dollar, which leads to a correction to the short-term upward trend of the USD index.
Technically, the fact that the “bulls” of the Brent managed to catch hold of important support at $55.9 per barrel allows us to keep faith in the recovery of the uptrend. Nevertheless, if the “bears” manage to return the quotes to $55 and take this level by storm, the risks of the rollback developing will significantly increase.
Brent, daily chart
The material has been provided by InstaForex Company – www.instaforex.com
Quotations of futures for the North Sea variety managed to push off from the three-week lows thanks to Saudi Arabia’s announcement of an unprecedented decline in exports. Riyadh is ready to reduce the supply of black gold in November to 7.2 million bpd, which is significantly lower than the demand for it which is at 7.7 million bpd. Investors digested the information for a long time, considering which is the more significant factor. Is it the growth in exports since September which is 6.7 million bpd, or is it the decline since the beginning of the year which is 7.8 million bpd in January and from the level of average values of the indicator in 2012-2016 which is 8.2 million bpd in November 2016? The mind eventually won and prices slowly crept up but for how long?
If there is not enough oil in one place, then there is a lot of need for oil in it. This leads to the growth of Brent, the expansion of its differential with WTI, and the increase in US exports. By prohibiting the supply of black gold abroad for 40 years, the United States was able to bring the price to a record value of almost 2 million bpd by autumn. They openly oppose OPEC in the market and the cartel’s general secretary, Mohammed Barkindo, can only appeal to American producers to join the Vienna agreement, reduce production, and balance the market. According to OPEC estimates, global black gold reserves currently exceed the average for 5 years by about 145 million barrels.
It is very doubtful that the head of a cartel will hear someone in North America. Most likely, the quotations of Brent and WTI reached their extremes at the end of September and are currently trying to determine the lower limit of the long-term consolidation range. At least hedge funds began to gradually wind down the net longs for the North Sea variety. At the end of the week of October 3, they fell 0.9% to 504263 contracts while the Texas one fell by 1%, to 249323 contracts.
Dynamics of speculative net positions on Brent and WTI
Source: Bloomberg.
The pressure on oil is caused by the expectations of Hurricane Nate hitting the coast of the Gulf of Mexico. The drop in demand for black gold from the refinery is a “bearish” factor for it since it allows us to count on the growth of reserves. So far, according to polls of Bloomberg experts, the volume of reserves will be reduced by 750 thousand barrels as per the results of the week ending on October 6.
Support for Brent and WTI is seen to weaken the US dollar ahead of the publication of the September FOMC meeting. The futures market estimates the chances of an increase in the rate for federal funds in December at 88%. There is still a lot of time until the last meeting of the Fed for the current year. Anything can happen, including a fall in the likelihood of the third act of monetary restriction in 2017. In such circumstances, speculators prefer to reinsure and reduce the size of their long lines in the US dollar, which leads to a correction to the short-term upward trend of the USD index.
Technically, the fact that the “bulls” of the Brent managed to catch hold of important support at $55.9 per barrel allows us to keep faith in the recovery of the uptrend. Nevertheless, if the “bears” manage to return the quotes to $55 and take this level by storm, the risks of the rollback developing will significantly increase.
Brent, daily chart
The material has been provided by InstaForex Company – www.instaforex.com