This is a long
awaited week for the oil traders as the Monthly Oil Report from IEA will be
released on Friday. The report will give us the first information about how compliant were the OPEC members in January with the production cut agreement. As this will be released as the first monthly oil report it could be
more important than the Monthly report from OPEC which will be released on
Monday. If trading Crude or oil currencies (CAD, NOK etc.) be ready for some extra volatility. So let’s look at
some key points from the last report + positioning data and what could be expected.
IEA Monthly oil report 10th February GMT 09:30
OPEC oil report 13th February
OPEC Oil Supply
The supply
from OPEC fell from record highs in December by 320 kb/d to 33.09 mb/d after lower output from
Saudi Arabia and Nigeria. The key will be to see more cuts in January as the
OPEC members follow the agreement on production cut.
World Oil Supply
As the
coordinated production cut raised prices, this stimulated rincreased production in
US and other non OPEC countries (even some of Non-OPEC producers agreed to join
the cartels production cut). This together with increasing supply from Iran, Libya
and Nigeria will be the major headwind for any rise in oil prices in the medium term.
Oil Demand
The demand
for crude was increasing in December 2016 driven by colder weather and rapid industrial
growth in Asia. On the other hand the market expects a decline in 2017 from 1.5mb/d
to 1.3mb/d due to higher products prices and warmer weather conditions. Demand had
important role in depressed crude prices even this side attracted less
headlines.
Money
Manager positioning
This will
be key the coming weeks despite the bullish charts and the eventually bullish
news. According to CFTC COT report the hedge funds are positioned extremely onesided as net longs are at record highs. Furthermore this net long has risen recently rapidly despite growing inventories. This wouldn´t be the
first time the last 12 months to see hedge funds being trapped. Remember, these
traders are very flexible, ready to exit the trades quickly to cut losses
therefore any bad news can lead to a huge long liquidation. The other side of the coin is, if all of them are long (with a little exaggeration)… who will buy and push the market higher if the news are good? Well, we'll see, obviously there is always some money out
there waiting for opportunities. Nevertheless, be ready to sell if the market shows signs of
weakness as it could become a carnage at the end.
Producer
positioning
On the
other side of the barricades the producers increased their hedging activity in
the last weeks growing their net short to record highs. For most of the US
shale oil producers the prices close to 60 dollars are enough to make production profitable and the increasing rig
count also shows that the capacities are reopening which will offset part of
the OPEC production cut.
Good Luck
and remember to watch your risk and be consistent
Mr. Tech Man
DISCLAIMER:
This material was created for informational purposes only and represents the
Land of Trading team’s view of the past and current economic and capital market
environment. It is not an investment advice and should not be viewed that way
at all, and the creators of this material cannot be held liable for any
potential losses resulting from trading, where despite this disclaimer someone
would consider this material as an investment advice. All rights reserved
©2016.
Contact:
landoftradingATgmailDOTcom, Blog: landoftrading.blogspot.com
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