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Sun, 22nd January 2017

Anirudh Sethi Report

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Archives of “Crude” Category

Russia ready to act on oil production freeze

Russian oil min Novak out with comments. Livesquawk reporting 17 Oct

  • oil prices good for current projects, too low for future
  • sees positive trend in oil talks
  • Saudi and Iran seem more flexible in talks

Brent crude currently $51.60 in retreat from $ 52.00 again. WTI $50.01 from $50.30 highs

USDCAD therefore nudging its way higher to 1.3181 from 1.3151

Iran hopes that a deal will be struck at OPEC’s Nov meeting

Comments from the Iranian oil minister

  • We should decide in November how much each country should produce

There’s been no end of comments from Iran so far today as the deputy oil minister was out earlier too saying that the early defined agreement in Algeria was a “baby step” in the right direction. He confirmed that Iran’s current output is 3.85mbpd, with exports at 2.2mbpd.

None of the comments are having an effect on prices as Brent sits at 51.75, with a 51.54/95 range.

Speculative Positioning in the Forex ,Crude

Speculators turned more bearish the euro and less bullish the Japanese yen in the Commitment of Traders week ending October 11.   The dramatic shift in US presidential polls and the continued rally in oil appeared to have spurred speculators to reduce short Mexican peso positions and add to longs.
 
Speculators in the futures market added 20.1k contracts to their gross short euro position, lifting it to 207.8k contracts.  There were still a few speculators that tried picking a bottom before the euro slipped below $1.10 in the spot market.  The bulls added 8.6k contracts, lifting the gross long position to 114.3k contracts.
 
The largest speculative gross long and gross short position in the euro.  The net short position rose to 93.5k contracts from 82.1k.  This is a two month high.  However, sterling’s net short position is larger at 95.5k contracts.  This slightly smaller than the previous reporting period (-97.6k contracts).  This reflected the fact that speculators covered more gross short positions than liquidated gross long positions.  Specifically, the 6.4k long contracts were cut while 8.5k short contracts were covered (leaving the gross long position at 50.4k contracts and the gross short position of 145.9k contracts).
Yen bulls move may be having second thoughts in the face of the continued (three consecutive weeks) dollar recovery in the spot market.  They liquidated 22.7k contracts to leave a gross long position of 79.3k contracts.  The bears were not enticed and added nearly a hundred contracts to the gross short position, which now stands 33.4k contracts. The net long position of 45.9k contracts (down nearly 23k contracts in the latest reporting week) is the smallest in two months. 

US weekly crude oil inventories +4850K vs +2000K expected

Crude oil inventories for the week ending Oct 7

  • Prior was -2976K
  • Gasoline inventories -1907K vs -900K exp
  • Prior gasoline +222K
  • Distillate inventories -3746K vs -1200K exp
  • Prior distillates -2359K
  • Production -0.2% w/w to 8.467 mbpd
  • Production -7.1% y/y

API reported a 2700K build in oil supplies, according to sources. They also estimated a gasoline draw of 688K barrels and distillates down 4520K.

The kneejerk reaction in crude has been lower on the strong headline draw.

ALERT- Oil Tumbles After Biggest Crude Inventory Build In 6 Months

With OPEC/NOPEC headlines the biggest drivers in recent days, the first inventory build in six weeks (according to API) sparked notable weakness in WTI after hours. The 2.7mm build (bigger than the 2mm expectation) is the largest since April. Gasoline stocks also rose (against expectations of a draw) as Cushing (and Distillates) saw a significant drawdown which we suspect are hurricane-affected moves.

API

  • Crude +2.7mm (+2mm exp)
  • Cushing -1.352mm (+100k exp)
  • Gasoline +688k (-900k exp)
  • Distillates -4.517mm

For the first time in six weeks, crude inventories rose last week by the most in 6 months. We also note a massive drawdown in Distillates (most since Oct 2014) due to the Hurricane

Even More OPEC Confusion: Unclear Who Cuts First, If Anyone, As Production Hits New Record High

Following yesterday’s latest IEA report which showed that OPEC production had hit an all time high, this morning OPEC released its own estimate of production by OPEC member nations for September and, not surprisingly, the latest report showed that in the month OPEC was supposed to be set on “cutting” production, the 14-nation group produced a whopping 33.39 million b/d crude in Sept., up 220k b/d from August.

While Saudi Arabia showed the largest decline of 88K to 19.49mmbpd, other members promptly ate up the Saudi market share which as recently as last month hit a record. To wit

  • Iraq +105k, 4.46m
  • Nigeria +95k, 1.52m
  • Libya +93k, 363k (an increase of 34%)

OPEC hopes to reach a common understanding with non-OPEC members on implementation of Algiers deal

OPEC, Sec Gen Barkindo speaking from Istanbul

  • Atmosphere is more positive now with non-OPEC countries
  • OPEC and non-OPEC meeting to take place on Wednesday

The silence from the US to all these freeze and cut comments is deafening, as they have mostly been all through the Saudi game of market share chicken.

Brent did manage to break the June highs around 52.80/85 so expect that to be the first main point of support if we fall back.