Crude oil: Disruption risks drive specs into Brent; distorted EIA report up next Crude oil: Disruption risks drive specs into Brent; distorted EIA report up next Crude oil: Disruption risks drive specs into Brent; distorted EIA report up next

Crude oil: Disruption risks drive specs into Brent; distorted EIA report up next

Commodities 5 minutes to read
Ole Hansen

Head of Commodity Strategy

Summary:  Crude oil remains stuck in a tight range with Brent and WTI having struggled all month to gain a foothold above $80 and $75, respectively. However, a succession of higher lows since December, when the Red Sea crisis began, point to limited selling appetite from traders worried that geopolitical tensions in the Middle East may escalate to threaten supply from key producers in the region. A focus that has seen speculators increasingly focus on Brent at the expense of WTI. Also, today's weekly EIA crude and fuel stock report is likely to be distorted after the recent cold 'bomb' disrupted production while increasing demand for heating oil and diesel.


Crude oil remains stuck in a tight range with Brent and WTI having struggled all month to gain a foothold above $80 and $75, respectively. However, a succession of higher lows since December, when the Red Sea crisis began, point to limited selling appetite from traders worried that geopolitical tensions in the Middle East may escalate to threaten supply from key producers in the region. While such an outcome stays very unlikely, the risk has nevertheless managed to support prices which otherwise may have traded lower amid ample supply and soft demand. 

In WTI, a sustained break above $75.50 could see it target the 200-day SMA at $77.6 with $80 being the next major psychological level after that. The rising trendline is currently providing support at $71.

Source: Saxo

Large money managers such as hedge funds and CTA’s have, since early December when the Red Sea crisis started, increasingly been diverging their crude oil exposure away from WTI towards Brent. According to weekly Commitment of Traders reports provided by the major futures exchanges in the US and Europe, the combined net long in WTI and Brent slumped to a 12-year low in early December at 171k contracts or 171 million barrels, with the split between Brent and WTI being 57% and 43%. 

However, the combination of the Red Sea crisis disrupting normal supply routes and rising US production have since then triggered a major divergence between the two. While the general rally in crude oil from the early December lows has seen the total net long jump by 85% to 317k contracts, the split between Brent and WTI has decisively moved in favor of Brent with 72% of the total net long being Brent. Investors appear to have concluded production growth will continue to pressure prices in the United States while the Middle East conflict will provide some support for prices in Europe and Asia.


Commodity articles:

23 Jan 2024: Silver and copper in focus after recent declines
19 Jan 2024: 
Commodity weekly: Middle East, US rates, Bitcoin ETFs & Freight rates
17 Jan 2024: 
Natural gas focus switch from cold to milder weather ahead
16 Jan 2024:
 Data dependent precious metals continue their bumpy ride
12 Jan 2024: 
Commodity Weekly: Geopolitical risks lift crude and gold prices
9 Jan 2024: 
Q1 Outlook – Year of the metals
5 Jan 2024: 
Commodity weekly: Bumpy start to 2024
4 Jan 2024: 
What to watch in crude oil as 2024 gets underway
4 Jan 2024: 
Podcast: Crude oil and gold in focus as a new year begins
21 Dec 2023: 
Weather, rates and unrest paint muddy picture for commodities in 2023
19 Dec 2023: 
Crude and gas pop on Red Sea Disruption Risks
14 Dec 2023: 
Fed's dovish tilt adds fresh fuel to precious metals
13 Dec 2023: 
Video - Why gold may enjoy a Santa rally for the 7th year in a row
12 Dec 2023: 
Video - Investing in Uranium
1 Dec 2023: 
Commodity weekly: Tight supply risks boost copper; OPEC+ struggles to control crude
30 Nov 2023: 
Precious metals take top spot for a second month
23 Nov 2023: 
A nervous crude oil market awaits OPEC's next move
23 Nov 2023: Podcast: 
Will Santa deliver another golden gift
22 Nov 2023: 
Will gold and silver see another Santa rally?
17 Nov 2023: 
Commodity weekly: Crude overshoots; silver the comeback kid
16 Nov 2023: 
Podcast: Silver comeback, watch OPEC as crude oil slides lower
16 Nov 2023: 
Crude oil weakness adds focus to upcoming OPEC meeting
15 Nov 2023: 
Soft CPI lifts gold and beaten down silver and platinum
12 Nov 2023: 
Copper supported by green transformation demand and peak rate speculation 
10 Nov 2023: 
Commodity weekly: Crude oil risks overshooting the downside

Previous "Commitment of Traders" articles

22 Jan 2024: COT: Commodities short-selling on the rise amid China woes and Fed caution
15 Jan 2024: 
COT: Grains sector slump continues; Mideast risks lift crude demand
8 Jan 2024
COT: Weakest commodities conviction since 2015
18 Dec 2023:COT: Crude long hits 12-year low ahead of FOMC bounce
11 Dec 2023: 
COT: An under owned commodity sector raising risk of an upside surprise in 2024
4 Dec 2023: 
COT: Speculators add further fuel to gold rally
20 Nov 2023: 
COT: Crude selling slows, grains in demand
14 Nov 2023: 
COT: Crude long slumps; agriculture sector in demand

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
Full disclaimer (https://www.home.saxo/legal/disclaimer/saxo-disclaimer)
Full disclaimer (https://www.home.saxo/legal/saxoselect-disclaimer/disclaimer)

Saxo Bank (Schweiz) AG
The Circle 38
CH-8058
Zürich-Flughafen
Switzerland

Contact Saxo

Select region

Switzerland
Switzerland

All trading carries risk. Losses can exceed deposits on margin products. You should consider whether you understand how our products work and whether you can afford to take the high risk of losing your money. To help you understand the risks involved we have put together a general Risk Warning series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. The KIDs can be accessed within the trading platform. Please note that the full prospectus can be obtained free of charge from Saxo Bank (Switzerland) ltd. or the issuer.

This website can be accessed worldwide however the information on the website is related to Saxo Bank (Switzerland) Ltd. All clients will directly engage with Saxo Bank (Switzerland) Ltd. and all client agreements will be entered into with Saxo Bank (Switzerland) Ltd. and thus governed by Swiss Law.

The content of this website represents marketing material and has not been notified or submitted to any supervisory authority.

If you contact Saxo Bank (Switzerland) Ltd. or visit this website, you acknowledge and agree that any data that you transmit to Saxo Bank (Switzerland) Ltd., either through this website, by telephone or by any other means of communication (e.g. e-mail), may be collected or recorded and transferred to other Saxo Bank Group companies or third parties in Switzerland or abroad and may be stored or otherwise processed by them or Saxo Bank (Switzerland) Ltd. You release Saxo Bank (Switzerland) Ltd. from its obligations under Swiss banking and securities dealer secrecies and, to the extent permitted by law, data protection laws as well as other laws and obligations to protect privacy. Saxo Bank (Switzerland) Ltd. has implemented appropriate technical and organizational measures to protect data from unauthorized processing and disclosure and applies appropriate safeguards to guarantee adequate protection of such data.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.