The recent rally in oil prices is supported by a combination of easing macro concerns after last week’s US jobs data and a recovery from what was probably too strong of a sell-off last week.
That’s the view of analysts at Macquarie Bank Limited, according to a new report sent to Rigzone this week. In the report, analysts noted that physical crude is tightening, but warned that total oil stocks appear to be softening, which they said could put pressure on margins.
“Last week’s positive April US employment data had the potential to ease macro concerns as crude oil prices recovered,” analysts said in the report.
“That said, the overall trend continues to show limited interest among investors to increase exposure to oil. The recent volatility in crude oil is also limiting the number of market participants as open interest and volume continue to decline by Brent,” they added.
“We believe the decline in market share has also been driven by a decline in conviction about the flat price trend through the balance of 2023,” the analysts continued.
Both WTI and Brent lost managed money and other net lengths over the past week, with WTI down 11,000 and Brent down 59,000, analysts at Macquarie Bank Limited noted in the report.
“WTI continued its downward trajectory driven by increased short positioning in the NYMEX contract, with the long/short ratio moving from 4.05 to 3.56,” the analysts noted.
“The Brent trend showed a decline in predominantly long positioning for the ICE contract, with the long/short ratio moving from 0.80 to 0.69,” they added.
“WTI+Brent Speculative Net Length fell 70.7k contracts to 149.1k; shorts grew 37.9k, while longs fell 32.8k. Managed Money’s net positioning down 104.3k to 287k: Short contracts grew 39.3k, while longs fell 65k Brent MM + Other net short up 59.5k contracts to -150.9k ; shorts increased by 22.7k, while longs decreased by 36.8k,” the analysts continued.
In a separate report published on May 5, which was also sent to Rigzone, analysts at Macquarie Bank Limited announced that crude is bullish in the short term as they expect crude oil direct balances to tighten and translate into global equity draws in the third quarter of this year. .
“The tightening is due to a combination of an increase in refinery operations following an unusually long global T/A season, increased throughput at existing refineries and increased new equipment,” they said analysts in this report.
“These factors should support crude oil prices by roughly $5 a barrel, but the benefit could be larger if product demand surprises,” the analysts added.
In that report, analysts at Macquarie Bank Limited noted that an initial rise in WTI and Brent prices of $5 a barrel had been reversed “as prices return to levels prior to early April.” [OPEC+] announcement”.
“The decline in prices appears to be driven by concerns about global economic growth, specifically in the US and China,” analysts said in the report.
To contact the author, please send an email andreas.exarcheas@rigzone.com
