Another measure, the ratio between long and short positions in Brent and WTI combined recently reached seven longs per one short. In 2018 it peaked at 15 to 1 before a major price correction saw it collapse to 6. Overall it highlights a market that has not yet run out of speculative buying, as long the short-term technical and/or fundamental outlook doesn’t change.
With this in mind, the market will be watching closely next week’s OPEC+ meeting on March 4 where the group will meet to discuss whether to provide more crude oil to the market from April and onwards. Back in December, the group decided to restore 500,000 barrels a day as part of the gradual process, that was paused in January, to push the remaining 7 million of withheld barrels a day back into the market.
The current bullish market behavior is sending a clear message to the group that a production increase is unlikely to hurt the current sentiment. While it may trigger a long overdue period of consolidation or even a mild correction, the bullish sentiment remains robust. Not least given the belief and strengthened by last weeks production cut that US producers remain focused on returning cash to shareholders instead of going on another cash-consuming drilling adventure.
The market will watch closely the group’s ability to reconcile the opposing views between Russia’s focus on market share and Saudi Arabia’s desire to drive prices even higher in order to better balance its budget. Having gifted the market and the group with a near 30% price jump since its early January one would expect that the Saudi’s hold most of the cards and that they will be able to dictate a path forward which is unlikely to upset the market to any large degree.
It’s Wednesday which means it is time for the Weekly Petroleum Status Report from the EIA at 15:30 GMT. At the time of writing the market has recovered to trade higher on the day. This following some price weakness overnight after an industry report from the American Petroleum Institute showed a surprise 1 million barrel rise in crude oil stocks. The first in five weeks if confirmed by the official report later where surveys point to a 6.5 million drop. The data covering the week to February 19 should also shed some light on the impact of the freezing weather in Texas, which cut both crude oil production and refinery activity. With this in mind gasoline and distillate stocks are both expected to have decline with EIA surveys pointing to drops of 3.5 million and 4 million barrels.
As per usual I will post results and charts on my Twitter profile @ole_s_hansen