In the near term, increased refinery operations should squeeze crude oil direct balances.
That’s what analysts at Macquarie Bank Limited said in a report sent to Rigzone on Thursday, adding that they expect a “tightening” third quarter.
“We are slightly bullish on crude oil direct balances as we expect an increase in refining series [around] 3.5 to 4.0 million barrels per day as units ramp up after transformations, new kits increase output in Middle East and China, and OPEC+ cuts begin,” they analysts said in the report.
“In our view, the most likely path for crude oil through the remainder of 2023 is to recover in Q3 before declining in Q4 as US and North Sea production growth accelerates, compliance with OPEC+ tapers and demand weakens due to recessionary pressures,” analysts. added
Macquarie Bank Limited representatives warned in the report that macroeconomic concerns continue to guide the path of crude oil prices and “potentially limit the upside of OPEC+ hikes and cuts.”
“In the US, jobless claims remain below expectations, regardless of growing economic concerns, which may point to the need for a future hike,” they said in the report.
“The ECB is expected to continue its tightening cycle with another 25bp rate hike in two weeks. In China, the recovery continues to underperform with the manufacturing PMI falling to 48.8, which which adds to global macro concerns about the potential impact of recessionary pressures on demand,” they added.
In a separate report sent to Rigzone on Tuesday, analysts at Macquarie Bank Limited noted that WTI lost money managed and other net duration over the past week, declining by 12.3 thousand.
“WTI continued its downward trajectory led by a decrease in long positioning with movement predominantly for the NYMEX contract, with the long/short ratio moving from 3.11 to 2.97,” the analysts stated in this report .
Brent built speculative net length over the past week, rising by 12.2K, representatives from Macquarie Bank Limited noted in this report.
“Brent saw an increase in longs and a decrease in shorts with movement primarily for the ICE contract, with the long/short ratio moving from 0.63 to 0.65,” the analysts said.
“The flow reversal could be attributed to Saudi Arabia’s warning ahead of the OPEC+ meeting scheduled for later this week,” they added.
The report highlighted that speculative net WTI + Brent duration fell by 0.1 thousand contracts to 112.9 thousand, with shorts growing 2.3 thousand while longs grew 2.3 thousand. It also noted that the net position of money under management increased by 22.6 thousand to 273 thousand, with short contracts decreasing by 10.4 thousand contracts while long contracts increased by 12.2 thousand.
Brent MM + Other net short decreased by 12.2k contracts to -168.2k, with shorts declining 0.7k while longs added 11.5k, the report noted. Brent Managed Money net duration increased by 26.6k contracts to 134.5k, with shorts decreasing by 12.6k while longs increased by 14k, and Brent Other net shorting increased by 14.4 thousand contracts to -302.7 thousand, with shorts increasing by 11.9 thousand while longs decreased by 2.5 thousand. K, the report revealed.
In another report sent to Rigzone on May 16, analysts at Macquarie Bank Limited said they remained slightly optimistic on crude oil direct balances in the coming weeks, but noted they were still concerned about global oil balances.
“In our view, last week’s price decline was driven by US economic data and the debt ceiling situation,” the analysts said in that report.
“We expect a rapid increase in refining runs to tighten direct crude oil balances, but the total oil balance could soften as demand growth slows, particularly in large OECD countries,” they added .
The Brent price fell from a close of $77.44 per barrel on May 9 to a close of $74.17 per barrel on May 12. At the time of writing, the former is trading at $76.15 a barrel and the latter is trading at $71.92 a barrel.
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