Story by Andreas Exarheas | RigZone.com |In an oil and gas report sent to Rigzone late November 22, Macquarie strategists said they remain structurally bearish but tactically bullish on oil prices, over the last few weeks of 2023 “due to year-end portfolio management and potential support from OPEC”.
“More fundamentally, bearish price action has been driven by macro concerns and large global supply growth while bullish moves are being driven by expectations for further OPEC+ cuts and positioning,” the strategists said in the report.
“OPEC+ cuts have not provided intended price support and in our view, further cuts won’t help without greater compliance, which we view as unlikely,” they added.
In the report, the strategists outlined that, in their view, in the short term, the oil price would drop $5 per barrel in a status quo outcome from a November 26 OPEC+ meeting. The oil price would increase $3 per barrel in the short term with a “one million barrel additional cut and compliance” outcome from that meeting and drop $10 per barrel in the short term in a price war outcome from that meeting, the strategists highlighted.
The Macquarie strategists noted in the report that WTI and Brent front spreads returned to contango over the past two weeks “as Cushing inventory has increased above critical levels”.
“Post-year-end 2023, we expect a price correction as a result of sweet supply growth in the U.S., North Sea, and Brazil (Med), and waning OPEC+ compliance,” they added.
The strategists also stated in the report that the “continued higher for longer narrative for U.S. interest rates and recent bearish Chinese data are potentially setting a ceiling on crude price as demand concerns start to impact price”.
Bearish View on Oil Maintained
In a separate report sent to Rigzone last week, Macquarie strategists said they “maintain a bearish structural view on oil but would not be surprised if prices rally for a few weeks due to year-end portfolio management”.
“Crude partially retraced last week’s losses after potentially becoming oversold on U.S. economic concerns and technical factors including the breach of the 200D MA,” they added in that report.
“Looking past year-end 2023 dynamics, potential demand implications of macro risks appear to be driving price action and positioning. Additionally, the market may be surprised at year-end 2023 supply growth from numerous entities including OPEC,” they continued.
“Middle East supply appears to be roughly 1.5 million barrels per day higher than expected, which has perpetuated soft physical markets and weaker spreads; WTI front spreads are in contango for the first time since July,” the Macquarie strategists went on to state in that report.
In the report sent to Rigzone last week, Macquarie strategists noted that “WTI decreased net length as Brent increased over the last week”.
“WTI net length fell by a sizeable 37.5K while Brent rose 4K. WTI + Brent MM showed another sizeable drop, falling by 44.5K contracts with WTI responsible for the majority of the move, again,” they added.
“WTI speculator length maintained its downward trajectory as new short interest was over seven times the decrease in longs. Again, Brent saw a smaller move with the decrease in shorts slightly exceeding the drop in longs as other participants continue to support length,” the strategists continued.
Speculative Positioning in Crude
In a report sent to Rigzone this week, analysts at Standard Chartered said speculative positioning in crude oil has moved further to the short side over the past week.
“Our money-manager crude oil positioning index has fallen 6.7 week on week to a four-month low of -73.3,” the Standard Chartered analysts stated in the report.
“Long positions across the four main Brent and WTI contracts fell 8.6 million barrels week on week to a five-month low 447.7 million barrels, while short positions increased 11.2 million barrels to 220.7 million barrels,” they added.
“A similar pattern is seen in money-manager long-short ratios; the ratio for the Chicago Mercantile Exchange (CME) WTI contract fell below 1.9 in the latest positioning data, having been above 10 as recently as five weeks ago,” they continued.
In this report, the Standard Chartered analysts noted that prices fell by $6 per barrel intra-week and then rebounded by $6 per barrel “without any particularly significant flow of news”.
To contact the author, email andreas.exarheas@rigzone.com [Original Story HERE]
