In a report sent to Rigzone late last week, analysts at Standard Chartered revealed that the company’s US oil data bullish index rose 29.1 points “to +98, 4 ultra bullish”.
“After months of providing relentlessly weak signals about the health of the US economy and the global oil market, weekly data from the Energy Information Administration (EIA) is sending significantly more positive messages,” they noted. analysts in the report.
“This is the second strongest reading on record. This is the second ultra-bullish reading in a row; the two-week average is the highest on record,” the analysts added.
In the report, Standard Chartered analysts noted that inventories fell against their five-year average in all categories except jet fuel, “with large draws from the crude oil average (7, 08 million barrels of which 3.21 million barrels in Cushing), gasoline (6.04 million barrels) and distillates (3.88 million barrels)”.
“Gasoline inventories are now particularly tight; they are at an eight-year low in March and only 2.39 million barrels above a seven-year low for any week in the first half,” the analysts added.
Analysts noted in the report that U.S. commercial inventories peaked at a shortfall to the five-year average of 151.7 million barrels in early June 2022, “coinciding with peak prices.” The shortfall was covered in mid-February this year, after which a surplus grew, peaking at 34.7 million barrels three weeks ago, analysts said in the report.
“The surplus narrowed in the latest release to just 1.6 million barrels, and the US market now appears poised to return to deficit,” the analysts said.
Analysts at Standard Chartered also highlighted in the report that the demand element of the data was stronger.
“The four-week average of the rising demand subindex turned positive for the first time since mid-April 2022, helped by gains in gasoline and jet fuel, but held back by distillates,” said.
“Improving data and the likely contraction in global inventories over the coming months should support an improvement in oil market sentiment; however, for now, the tone among hedge funds in particular appears to have remained stubbornly bearish,” the analysts added.
In a separate report sent to Rigzone on March 31, analysts at Standard Chartered noted that demand for distillates was “perhaps the only weak feature” of the Administration’s latest release of information on energy at the time, adding that the remainder was “extremely strong.”
“Our bullish index on US oil data rose 66.5 week-on-week to an ultra-bullish +79.8 – only one release has been stronger in the past 18 months,” analysts said in that report .
“Crude inventories fell by 10.28 million barrels relative to the five-year average, product inventories fell by 4.45 million barrels versus the five-year average,” the analysts added.
Rising capital flows
In an oil report sent to Rigzone on Monday, analysts at Macquarie Bank Limited noted that they expect “bullish capital flows to continue for the time being as [OPEC+] production cuts will boost storage consumption given current market expectations for demand, which have remained largely intact despite concerns about a global recession.”
Analysts warned in the report that they expect market expectations for big draws in the second half of the year to moderate “due to (1) NOPEC supply response, (2) disappointment of demand and (3) compliance challenges with the OPEC+ agreement.”
“Following last week’s OPEC+ announcement, both WTI and Brent prices have risen by approximately $5 per barrel, suggesting the market expects 50 percent compliance,” said the analysts in the report.
“The rule of thumb is $1 per 100,000 barrels per day of crude oil supply loss,” they added.
In the report, Macquarie analysts said WTI and Brent built speculative net length, noting that WTI rose by 39K and Brent rose by 68K.
“In particular, money managers increased their bullish bets on ICE Brent, resulting in the highest number of longs in the past three weeks and the lowest number of shorts seen in the past month,” analysts said in the report
“WTI + Brent Speculative Net Length rose by 107.1k contracts to 282.7k; shorts decreased by 55.9k, while longs added 51.3k. Managed Money’s net positioning rose by 140.9k to 402k; Shorts declined by 72.8k contracts, while longs added 68.1k,” the analysts added.
“Brent MM + Other net short fell by 68.1K contracts to -28.4K; shorts fell 27.3 thousand, while longs grew 40.8 thousand. Brent Managed Money net duration grew by 80.5 thousand contracts to 236.5 thousand; shorts fell 34.1 thousand, while longs grew 46.4 thousand. Brent Other net short grew by 12.4 thousand contracts to -264.9 thousand; shorts grew 6.8k, while longs fell 5.6k,” they continued.
In a separate Macquarie report sent to Rigzone on April 6, the company’s analysts noted that they were “relatively less bearish than before the [OPEC+] cut,” but added that they remained cautious about “overly bullish sentiment.”
“Our caution is driven by risks related to the potential for unusually large deal slippage, a strong ongoing global supply response and the potential for demand disappointments against current bullish expectations,” the analysts said in this report.
“The bulls correctly point out that OPEC cuts are a key geopolitical factor that should always be built into SD balances. While we agree, we also think it’s important to interpret the cuts correctly,” they add the analysts.
“We believe that OPEC, through its broad window on global markets, was seeing large surpluses, YTD and Bal 2023,” they stated.
OPEC+ cut
In an extraordinary market note sent to Rigzone earlier this month, Rystad Energy Senior Vice President Jorge Leon noted that OPEC+ supply cuts are set to begin from May, “which coincides with the uptick in the pre-summer refinery season and an anticipated demand for refined products.” rebound”.
“Saudi Arabia will bear most of the cuts, reducing production by 500,000 barrels per day,” Leon said in the market note.
“The other participants are the United Arab Emirates (144,000 bpd), Kuwait (128,000 bpd), Iraq (211,000 bpd), Oman (40,000 bpd), Algeria (48,000 bpd) and Kazakhstan (78,000 bpd), according to statements from their respective governments”. added.
“Russia also announced that the 500,000 bpd production cut, initially from March to June, will be extended until the end of the year,” Leon continued.
Rystad’s senior vice president noted in the note that the voluntary reductions are in addition to the current official OPEC+ cuts of two million barrels per day announced in October 2022.
“The fact that all these countries adhere to the current OPEC+ quotas, with compliance levels close to 100 percent, implies that the announced voluntary cuts will also be real,” Leon said in the note.
To contact the author, please send an email andreas.exarcheas@rigzone.com
