Oil Price - June 17

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dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Oil Price - June 17

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Investing.com - Oil prices lost ground on Monday as a reported delay in a key meeting to extend production cuts by major exporters raised uncertainty over the agreement.

New York-traded West Texas Intermediate crude futures fell 49 cents, or 0.9%, at $52.02 a barrel by 8:10 AM ET (12:10 GMT), while Brent crude futures, the benchmark for oil prices outside the U.S. lost 53 cents, or 0.9%, to $61.48.

“We are hoping that we will reach consensus to extend our agreement when we meet in two-weeks-time in Vienna,” Saudi Energy Mi nister Khalid al-Falih told reporters on the sideline of a G20 energy and environment ministerial meeting in Japan, according to Reuters.

Asked when the meeting will be held, he said: “Probably the first week of July."

The remarks appeared a step back from comments at the beginning of June that members of production cut agreement were “close” to reaching an understanding.

Falih indicated a week ago that Russia, who leads non-OPEC members in the pact, was the only party still undecided.

The reference to July served as confirmation of weeks of speculation that the original dates for the meeting - June 25 for OPEC with non-OPEC members joining the following day - would be delayed at Russia’s request. OPEC has yet to change the formally change the official schedule.

“The longer OPEC delays having that meeting, the more doubt there will be that it has enough support from its members and allies to extend cuts critical to offset some of that plentiful oil supply Falih spoke about,” Investing.com senior commodity analyst Barani Krishnan said.

Oil prices have been under pressure from signs of weakening global demand and U.S. production at record levels. U.S. crude is down nearly 22% from highs seen April, with the Brent barrel close behind with almost a 19% decline. According to CFTC data published Friday, speculative net long positions in crude oil fell for a seventh straight week last to stand at their lowest level since early March.

The International Energy Agency warned in its monthly report released on Friday that outlook for oil demand growth in 2019 has dimmed due to worsening prospects for world trade. Over the weekend, U.S. Commerce Secretary Wilbur Ross played down the likelihood of President Donald Trump and Chinese counterpart Xi Jinping reaching a deal at the G20 meeting on June 28 and 29. He reiterated Trump was “perfectly happy” to stick with his current tariff strategy.

Elsewhere, Iran announced Monday that it will break the internationally-agreed limit on its stocks of enriched uranium in 10 days unless Europe takes steps to help it mitigate the economic impact of U.S. sanctions.

Tehran had previously threatened to renege on the nuclear deal after the Trump administration withdrew from the pact last year and imposed economic sanctions.

U.S. Secretary of State Mike Pompeo said Sunday that the U.S. is “considering a full range of options”, including military ones, with regard to iran, which he has accused of attacking two oil tankers near the Persian Gulf last week. Iran has denied the accusations.

In other energy trading, gasoline futures declined 0.9% at $1.7165 a gallon by 8:12 AM ET (12:12 GMT), while heating oil traded down 0.8% at $1.8152 a gallon.

Lastly, natural gas futures lost 0.8% at $2.367 per million British thermal unit.
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34465
Joined: Fri Apr 23, 2010 8:22 am

Re: Oil Price - June 17

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Hedge funds sell more oil, but balance of risks is shifting - Reuters News

By John Kemp
LONDON, June 17 (Reuters) - Hedge fund managers sold yet more oil last week as a weaker outlook for the global economy and expectations of a hit to consumption more than offset concerns about sanctions on Iran and Venezuela and other production problems.

Hedge funds and other money managers were net sellers of another 96 million barrels of petroleum-related futures and options contracts in the week to June 11, exchange and regulatory data shows.

Fund managers have now sold 396 million barrels in the six most important petroleum contracts over the last seven weeks - substantially reversing net purchases of 609 million barrels in the 15 previous weeks.

Portfolio managers last week sold Brent (12 million barrels), NYMEX and ICE West Texas Intermediate (52 million), U.S. gasoline (8 million), U.S. heating oil (6 million) and European gasoil (18 million).

The heaviest selling was concentrated in WTI, reflecting concerns about local overproduction of crude in the United States, and middle distillates, reflecting concerns about a global slowdown hitting freight and manufacturing.

Hedge funds now hold just three bullish long petroleum contracts for every bearish short one, down from a ratio of almost 9:1 on April 23 (https://tmsnrt.rs/2InCFG8).

SHIFTING RISK

From a fundamental perspective, the market is still delicately poised between bearish risks arising from a global slowdown and bullish risks from supply interruptions in the Middle East and elsewhere.

From a positioning perspective, however, the balance of risks had swung from strongly bearish at the end of April to neutral or even slightly bullish by the middle of June.

The shift is most evident in middle distillates, where funds are now running the biggest net short position in U.S. heating oil for almost two years.

Fund managers have rarely held such a large short position except during a recession or an extended global slowdown such as that of 2015/16.

Similarly, hedge funds are now running one of the most bearish positions in NYMEX and ICE WTI since the end of the oil market slump in early 2016.

If the global economy slows further in the second half of the year, as most traders expect, and seems the most likely outcome, it will validate these bearish positions as prices come under further pressure.

But if the economy avoids recession and re-accelerates, which remains possible, the race to close short positions and re-establish new longs would produce a ferocious short squeeze.
Dan Steffens
Energy Prospectus Group
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