In a new report sent to Rigzone, Macquarie strategists Vikas Dwivedi and Walt Chancellor announced that they remain “short-term bullish but structurally bearish” on the oil market following last weekend’s OPEC+ meeting.
“We continue to believe that the large 3.5 to 4.0 million bpd increase in refinery operations, off-season ME energy consumption and OPEC+ cuts will tighten direct balances of crude during 3Q23,” the analysts said in the report.
“From there, we expect a correction in 4Q23 and 2024 due to growth in US and N. Sea sweet production, the OPEC+ default and slowing demand due to recessionary effects,” they add.
“In our view, the structural challenge in the oil market is the ease of oil production growth, a feature we believe will persist for several years,” the analysts continued.
In the report, Macquarie strategists highlighted that, in the US, refiners need heavier and more sour barrels “to balance the crude shale”, as much of the domestic supply is light and sweet.
“Therefore, the United States is dependent on heavy and sour crude imports from the Middle East, Mexico and South America to maximize refinery utilization,” the analysts said.
“Saudi Arabia’s extendable and reviewable 1 million bpd voluntary cut for July has the potential to reduce … steep discounts and further compress … refiner margins,” they added .
Strategists also noted in the report that macro concerns associated with the impact of recessionary pressures on demand may limit the ability of OPEC+ intervention to support the price.
“Demand is a key part of the balance that has the most uncertainty, with the market focused on growth in Chinese demand,” the analysts said in the report.
“Currently, the IEA attributes about 60 percent of global demand growth to 2023 to China; instead, we estimate that China will contribute [around] 35 percent,” they added.
WTI, Brent net length
Speculative net WTI + Brent duration fell 37.3k contracts to 75.6k, with shorts adding 37.2k while longs fell 0k, Macquarie strategists noted in the report .
Managed Money net positioning decreased by 30.4k to 243k, with shorts increasing by 22.5k contracts while longs decreased by 7.9k and Brent MM + Other net shorts decreased by 10, 1K contracts to -158.1K, with shorts declining 5.9K while longs added 4.3K, analysts revealed.
Brent Managed Money net length grew by 20,000 contracts to 154,500, with shorts falling 12,000 while longs rose 7,900, and Brent Other grew by 9,800 contracts to -312,600, with shorts growing 6,2000 while longs fell 3,7000. , analysts noted.
In another report sent to Rigzone this week, analysts at Standard Chartered noted that hedge funds and commodity trading advisers moved more to the short side of crude oil in the build-up to the meeting OPEC+ of June 4, “even beyond the extreme reached two weeks ago”.
“Our Crude Oil Money Manager Positioning Index fell -10.9 week-on-week to -100.0; the reading of -100 indicates that the network of money managers whenever a share of open interest is at its lowest level in at least five years (in fact, it is its lowest level since 2009),” stated the Standard Chartered analysts in the report.
“Total money management shorts in the four main Brent and WTI futures contracts rose by 20.4 million barrels week-over-week to 221.4 million barrels, while longs fell by 12.9 million of barrels to 424.8 million,” they added.
“Our Diesel Positioning Index fell 10.9 week-on-week to -84.9, while gasoline remains the only energy contract with a positive Positioning Index, with the index rising 5.6 week-on-week to +15.5,” analysts said.
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