BAKU, Azerbaijan, July 13
By Leman Zeynalova – Trend:
Oil prices won’t move like previous time unless OPEC+ prepares bullish surprise, Trend reports with reference to Rystad Energy.
Oil prices fell as an upcoming OPEC+ meeting is expected to suggest easing the alliance’s production cuts, while Covid-19 cases continue to surge in the US and other markets, putting the demand recovery pace in doubt.
Saxo Bank said that despite solid price gains, both WTI and Brent crude oil were net-sold with the combined net-long falling by 26k lots to 557k lots.
“The reductions primarily due to long liquidation as both contracts struggled to break resistance at $41/b in WTI and $44/b in Brent. However, based on the reduction being led by long liquidation and not fresh short selling, the bullish narrative has yet to be challenged. The long position in natural gas jumped by 27 percent as an emerging heatwave across the U.S. helped lift the price by 7 percent,” said Saxo Bank.
The Bank said that crude oil trades lower today following Friday's rally.
“Key focus this week will be Wednesday’s OPEC+ meeting where the group needs to decide whether to keep the temporary 9.6 million barrels/day production cut into August or begin to restore up towards 2 million barrels/day. Reports over the weekend said the group look set to ease oil cuts as demand continues to recover. The decision however comes at a time where Libya attempts to restore production, U.S. stocks are close to record levels while the pandemic is far from under control. Especially across the three biggest fuel consuming U.S. states. Both benchmark oil contracts in our view remain range-bound with resistance at $41 on WTI and $44 on Brent capping the upside,” said the Bank.
Rystad Energy believes that oil demand is again at threat as a second wave of Covid-19 seems to be on the horizon, especially in the US.
“While full lockdowns haven’t been reinstated, some cities like Atlanta are rolling back reopening plans, and the governor of Texas has warned the state may have to close back down should hospitals become overwhelmed. The second wave appears to be manifesting regionally, with high case breakouts in the US and Brazil, and while this carries downside risk to oil demand, OPEC may see it as a regional, not global, market to be managed,” said Rystad Energy.
“More mixed signals out of Libya on whether oil production will be able to restart emerged over the weekend, as the head of the Libyan National Army (LNA) said on Saturday that the oil blockade would continue, just a day after the National Oil Corp (NOC) said exports would be resuming. One crude tanker headed for Italy departed on Friday, only to be followed by an announcement on Sunday that the country was declaring force majeure on oil exports. Rystad believes some fields in the east will be able to restart, but will likely go to local refineries and storage until the export question is sorted.”
As a result of the previous OPEC+ meeting, prices got a boost well-above 40 dollars per barrel, as the alliance decided to extend the deep cuts into July, said Rystad Energy.
“This was welcomed then by the market, but a slower demand recovery amid surging Covid-19 cases cut back the gains. Unless OPEC+ is preparing another bullish surprise and suggests an unexpected further extension of its existing cut levels, prices are not likely to move like the previous time.”
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