Global Oil Market is tightening

[dan_s]

Whatever It Takes – Again by Phil Flynn 10/24/2017

Saudi Arabia said they will do whatever it takes to balance the oil market, again. Yet this time the market, unlike the last time, believes them as OPEC and their compliance has earned some market cred. Oil prices, which were floundering lower overnight, reversed course and surged higher after Saudi Energy Minster Khalid A. Al-Fali spoke and said that he was “determined to do whatever it takes to balance the market.” He also said that the oil producer will have more to do, which is signaling that it is very likely that OPEC and Non-OPEC will extend current production cuts, as he says that they are “very flexible and will keep their options open”, even though it seems based on data that we are already in a daily supply versus demand deficit.

Khalid A. Al-Fali also noted the shale-oil slowdown. Pointing out that shale-oil production has risen only slightly. This is a strong statement as many feared that shale oil production would offset OPEC and Non-Opec cuts, but the reality of shale economics and falling production per well has proven that at least right now, the shale oil producers were not up to the task. < As I have been telling you all year in my podcast, it is IMPOSSIBLE for U.S. shale to meet global demand on its own. Now it looks like U.S. oil production reaching 10 million barrels per day unless oil prices go a lot higher. - Dan

The Saudi Energy Minster also said that compliance to the deal was better than he expected and that global inventories are declining. In other words, OPEC is on the verge of accomplishing their goal of ridding the world of the oil supply glut and will create an environment for higher prices soon. This comes as the American Petroleum Institute should report another big drop in U.S. crude, gasoline and distillate supply. The possibility of an upside breakout is rising.

[dan_s]

Oil could be moving into higher range. According to Reuters, oil prices have gained even as hedge funds and other money managers have stepped up short bets, a sign that the oil market has improved and can withstand a wave of shorts. That could be a harbinger of oil moving up into a higher trading range.

Full article: https://www.reuters.com/article/oil-hed ... SL8N1MY3CV

The combination of rising prices with a new wave of short selling indicates U.S. crude prices may be moving into a new, higher trading range.

From a pure positioning perspective, the concentration of long positions among hedge funds continues to pose a downside risk to oil prices if fund managers attempt to realise some of their profits before the year-end.

But a move into a higher range would be consistent with the emerging fundamental picture, with U.S. oil drilling slowing, crude stocks falling, and consumption of refined fuels at home and in export markets increasing strongly.

[dan_s]

China’s oil demand could be stronger than the market thinks. According to satellite data, China might actually be stashing oil in its strategic reserve at a smaller rate than everyone believes, Barclays wrote in a note. The implication is that China is actually consuming more oil than official data suggests, a very bullish development if true. “It implies that China’s refinery runs and end-use consumption may be understated, and that global balances are tighter than consensus and our own forecasts,” Barclays analysts wrote.