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In an oil and gas report sent to Rigzone this week, Macquarie strategists outlined that the market is now skeptical of supply disruption events.
“Even with the current focus on potential supply disruption, increasing macro concerns and the potential impact on demand are shaping views and positioning,” the strategists noted in the report.
“We continue to hold a bearish view while appreciating the risks associated with the current Middle East conflict. Crude is approaching the 200D MA which could accelerate liquidation,” they added.
“We anticipate the potential of further price correction through year end 2023 as a result of sweet production growth in the U.S., North Sea, and Brazil, and OPEC+ non-compliance appears to be picking up speed, something we have felt was likely,” the strategists continued.
“The physical indicator dashboard (which we use cautiously), is currently bright red,” they went on to state.
The Macquarie strategists highlighted in the report that the “continued higher for longer narrative for U.S. interest rates and recent bearish Chinese data are pressuring crude prices and potentially creating a headwind for oil demand”.
WTI decreased net length as Brent increased over the last week, the strategists noted in the report.
“WTI fell by 62.5K and Brent rose by 12K. WTI + Brent managed money dropped by 75.2K contracts with WTI holding 82 percent of the move,” the analysts stated in the report.
“WTI speculator length maintained its downward trajectory as new short interest exceeded the decrease in longs. Brent saw a smaller move with almost triple the increase in longs as improvement in shorts with flow largely driven by improved sentiment of other participants,” they added.
“Again, commercial participants demonstrated opposing changes in positioning with Brent decreasing by 5K and WTI rising by 39K, with WTI length possibly attributed to an increase in refiner margin hedging,” they continued.
In a separate report sent to Rigzone on October 31, Macquarie strategists stated that, “despite justified focus on supply risks, rising macro concerns are becoming larger factors in oil views and positioning among oil generalists and specialists”.
“We remain bearish but recognize upside risks associated with the Middle East conflict. We do not expect a supply disruption without material escalation,” they added in that report.
Macquarie strategists highlighted in that report that “both WTI and Brent speculative length fell over the last week”. Brent decreased by 5.4K and WTI fell by 3.5K, the strategists outlined in the report.
The U.S. Energy Information Administration’s (EIA) latest short term energy outlook (STEO), which was released this week, sees the Brent spot price averaging $90.27 per barrel in the fourth quarter and $83.99 per barrel overall this year. The November STEO projects that the WTI spot price will average $85.93 per barrel in the fourth quarter and $79.41 per barrel overall in 2023.
In a report sent to Rigzone on September 26, Standard Chartered projected that the ICE Brent price would average $93 per barrel in the fourth quarter and $91 per barrel in 2023 and that the NYMEX WTI price would average $91 per barrel in the fourth quarter and $88 per barrel in 2023.
In a release sent to Rigzone this week, Al Salazar, a director at Enverus Intelligence Research (EIR), said “EIR expects Brent prices to trade in the high-$80s – low-$90s into 2024, due to OPEC intervention”.
“The Saudis wish to take the cyclicality out of the market,” Salazar added.
At the time of writing, the Brent crude oil price is trading at $80.68 per barrel while the WTI crude price is trading at $76.37 per barrel. The former closed at $96.55 per barrel on September 27 and the latter closed at $93.68 per barrel on the same day.
To contact the author, email andreas.exarheas@rigzone.com
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