WTI tests $60/b as funds step up buying on dovish FOMC
Head of Commodity Strategy
Summary: The latest EIA report showed a rise in stocks, sending prices a tick below the $60/b level in the immediate wake of the release.
Production cuts from the Opec+ group of producers have been the main reason for the dramatic recovery since the 38% price slump during the final quarter last year. In fact the recovery has been so strong and swift that WTI is currently heading towards its biggest quarterly gain – currently 32% – since Q2 2009 when the recovery from the global financial crisis saw it jump by more than 40%.
The pull from funds primarily speculating at the front of the curve has supported a jump in the Brent crude oil prompt spread to $0.6/b backwardation while the contango in WTI crude oil has been reduced to -$0.16/b.
The biggest short-term risk to the oil market is likely to be driven by renewed stock market weakness as it would help erode the recent pick up in risk appetite, particularly considering that the fresh addition of 124 million barrels during the past month up until March 19 has brought the total net-long to 505 million barrels.
WTI crude oil is currently trading in the middle of a $57.70/b to $61.6/b range. The weekly inventory report highlighted below initially sent the price of both oil and products lower by 0.5%.
Latest Market Insights
Quarterly Outlook Q3 2022: The Runaway Train
- Central banks' attempts to kill inflation is a paradigm shift, which could end in a deep recession.
Tangible assets and profitable growth are the winnersWith US equities officially in a bear market, the big question is where and when is the bottom in the current drawdown?
Understanding the lack of investment appetite among oil majorsThe everything rally seen in recent quarters has become more uneven, as its strength is driven by commodities in short supply.
The pressure is on as the wind leaves the sailsWith cryptocurrencies in sharp decline, are we entering a crypto winter or is the bear market a healthy clean-up of the crypto space?
Why the Fed can never catch up and what turns the US dollar lower?Many other central banks are set to eventually outpace the Fed in hiking rates, taking their real interest rates to levels higher than the Fed will achieve.
Bank of Japan: Swimming against the tideThe Japanese economy has gone from the age of deflation to rapidly rising prices in no time, leaving the Bank of Japan in a pickle.
Green transformation detour and bear market hibernationWith the impending risk of global econonomic derailment, we share the five things investors need to consider in this new half year.
Crisis redux for the eurozone?Whether there's going to be a recession in Europe or not, the path towards a stable economy will be agonizing.
Technical Outlook: Gold, Oil and a remarkable multi-decade perspective on EquitiesThe Nasdaq bubble pattern, USDJPY resistance, crude oil uptrend losing steam and the technical outlook for USD.
China: the train of new development paradigm left the station two years agoChina is transiting to a new development paradigm, as they are hit by deteriorating terms of trade, a slower global economy and an uncertain future while continuing attempts to contain the pandemic.
Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)