Oil prices ended last week with gains of 3.42% and 3.79% for Brent <LCOc1> and WTI <CLc1> respectively. Gains came on the back of continued anomalies in US oil inventories, which saw further sharp declines in gasoline stocks. EIA data suggest that since the week ending Aug 27th the motor fuel inventories have dropped by an aggregate 11.63 million bbl. Monday morning finds crude markers holding steady, albeit with minor gains. Refinery maintenance however will put a lid in demand for the coming weeks, likely mounting pressure on oil benchmarks.
Speculators in the US trimmed their net long bets by more than 12 million bbl, possibly as they expect limited further gains on the back of an upcoming soft-patch in demand, an outcome of refinery maintenance. Longs were slushed by 17 million bbl, while shorts were reduced by just below 5 million bbl.
Producers on the other hand, lifted their net position by 24.86 million bbl, to just below 100 million bbl net short, highest level since early 2015. In recent weeks US producers have lifted their longs bets, while trimming shorts, suggesting that hedging activity has decreased. However, as most of the WTI forward curve now trades above $50/bbl hedging may soon pick up, mounting pressure.
Active rigs, drilling for oil, dropped by seven units in the US the previous week. The fleet now stands at 749 units, level last seen mid-June. The big shale plays saw almost no rig removals, with the North Dakota count rising by one rig at 53.
The Oil Research Team
Supply Chain & Commodities Research