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03/02/18 Market notes

Oil market review: Saudi Arabia exports and technical picture

Oil market review: Saudi Arabia exports and technical picture

Saudi Arabia Oil supplies

After a short break Saudi Arabia continued to increase oil exports from the country.

According to JODI, the Middle East Kingdom supplied to the world market more than 7 million barrels per day in November, marking the growth of export for two consequent months. Continue reading

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25/01/18 Market notes

Narrowing debt spread and boom and bust cycles

Narrowing debt spread and boom and bust cycles

Oil speculations helped US oil firms to cover 10% of drilling costs

The collapse of oil market started in the middle of 2014 and turned to recovery in the beginning of 2016 year when priced finally returned to upward trajectory. For this time United States managed to accumulate reserves and sell them in profit later.

Active stage of amassing crude reserves started in October 2014 and continued till the end of March 2017. Enjoying underpricing United States bought 211.2M barrels with average price of $50 per barrel. About $10.6 billion were spent for buying cheap oil. Continue reading

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19/01/18 Market notes

Oil market review: oversupply may turn to deficit

Oil market review: oversupply may turn to deficit

The oil market has been facing a deficit of crude oil for the third quarter in a row, OPEC reported in its monthly review on Thursday.

According to the organization research, the demand for black gold outpaced supply by 0.9 million barrels per day in the fourth quarter of 2017. According to the cartel’s forecast, world oil consumption in the first quarter of this year will amount to 97.2 million barrels per day. Decrease in demand compared to the fourth quarter of 2017 may result in a supply glut. For example, if the volume of production in OPEC does not change Continue reading

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11/01/18 Market notes

Swap dealers NYMEX keep oil market in touch and go state

Swap dealers NYMEX keep oil market in touch and go state

Hedge funds on the West staged profit taking move before the New Year and opted to start from a scratch the positioning in the new year. But Swap dealers NYMEX keep holding enormously high number of short positions, expecting major drawdown.

As of January 2, the volume of long positions in commercials decreased by 17.4 thousand contracts to 436.1 thousands. The amount of open short positions remained practically unchanged and at the start of the year was about 39.7 thousand contracts. Net “long” for crude oil, in turn, dropped to 396.4 thousands, but it is still above the average of the last three years by 186 thousand contracts, or almost twice. Continue reading

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19/12/17 Market notes

Cash inflow in biggest US ETF signals calm among retail investors

Cash inflow in biggest US ETF signals calm among retail investors

Cash inflow in biggest US ETF November

Recently unqualified investors have been heavily taking long positions on US stocks with unprecedented rush, reported Ameritrade brokerhouse, which has a client base of 6M traders.

The dynamics of biggest ETF fund in the US – ETF SPY, which mirrors movement of S&P 500 index shows that the cash outflow turned to abrupt cash inflow signaling growing calm among investors. From the start of 2017 to 20 of November the outflow amounted to 14.3B dollars, but a month later investors poured back 16.8B dollars, pulling the fund’s size curve into positive area. A similar trend occurred during the peak of «Trumpenomics» euphoria in March which then gave place to market anxiety and expectations of stock market retracement.

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04/12/17 Market notes

OPEC agrees to prolong cuts, markets unsure about effect

OPEC agrees to prolong cuts, markets unsure about effect

Mixed sentiments

Hedge funds continue to step up with bullish pressure on oil. Before the meeting of OPEC + in Vienna, their short positions on black gold came close to the lowest levels ​​of last three years.

By November 28, hedge fund portfolios had 436,600 long and 40,1 thousand short positions. For a week, their longs increased by 26.8 thousand contracts, while short decreased by 25.9 thousand. Thus, the net long position on oil rose to 396.5 thousand contracts. Thus, only 17.2 thousand contracts are missing to the record.

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23/11/17 Market notes

Oil-Ruble correlation is back to the game. Now what?

Oil-Ruble correlation is back to the game. Now what?

US Output

With the upturn on energy market driven by various disruptions and OPEC pledge to keep production depressed for more, US crude output is on track for a new record. But now the industry seems to be learning how to live together with a new rival, rather than fighting with it.

According to EIA, US October output could set a new record of 6.1M b/d. The last high was reached on March 2015, when shale producers was extracting 6.09M barrels from their wells. It isn’t a finalized reading though, as the Energy department will revise it soon. Haynesville and Utica low-output regions has been excluded from the list because they account for only 70K b/d both. EIA forecasts that shale producers will rise to 6.28M barrels in December, pushing limits further.

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12/11/17 Market notes

What to expect from EIA reports in coming weeks

What to expect from EIA reports in coming weeks

Oil output in the United States hit new record, rising above the last by 10K barrels. Oil market pretends the output rally doesn’t bother it.

According to the US Energy Department the average daily output advanced to 9,62M barrels. The last record was set in June 2015 when the «Great» advent of shale oil brought production to whopping 9,61M barrels per day.

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08/11/17 Market notes

Austerity isn’t about Saudi Arabia

Austerity isn’t about Saudi Arabia

The higher cliff, the louder fall

While speculators are boosting long positions on crude and paring down shorts, smart money are actively hedging themselves against drawdown of the prices.

According to CFTC data, hedge funds portfolios added 387.5K longs and 106,2K short positions. Therefore net long bets rose by 281,2K. The weekly change is still below the February upsurge when money managers additionally poured 413,6K long contracts. Continue reading

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01/11/17 Market notes

Crude oil growth hides welcome inflation pressure

Crude oil growth hides welcome inflation pressure

Reuters forecasts

Oil is likely to extend rebound next year but periods of smooth rally are likely to follow severe volatility breaks. OPEC output cap probably stretched for the end of next year is projected to offset increase in US oil production returning global reserves to 5-year average.

As a Reuters study showed, analysts raised their oil price projections, as market hopes for more OPEC concessions were confirmed by statements of Saudi officials.

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30/10/17 Market notes

Oil breaks $60, but bulls’ progress looks fragile

Oil breaks $60, but bulls’ progress looks fragile

US oil producers are increasing oil supplies to Asia undermining market power of OPEC in this region, which remains core consumer for the cartel.

For Asian buyers, this is a welcome event. They benefit from the diversification of the sources of oil supplies as well as rising competition between suppliers, which leads to price wars. Simply put, asian oil refineries are getting more suppliers to work with and thus more choice in terms of grades of oil. India received the first cargo of American oil – 1.6 million barrels on October 2 – a result of the June visit of country’s Prime Minister Narendra Modi to the United States, during which agreements were signed for the supply of 8 million barrels of oil to India. Continue reading

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16/10/17 Market notes

Gold price heads back to $1,350?

Gold price heads back to $1,350?

Gold price was stable above the psychological level of $ 1.300 on Monday amid concerns over Iran’s nuclear program, while strengthening of the dollar restrained the asset’s growth. Price was at $1.304.50 per troy ounce, compared with $1.304.47 an ounce at the close of trading on Friday. Futures for gold in the US for December delivery went up by $2.2 to $1.306.9 per ounce.

The dollar advanced at the first day of this week but lost momentum for the Yellen-fueled rally, while Asian stocks jumped to a maximum of 10 years, as China’s buoyant economic data contributed to higher commodity prices. Continue reading

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04/10/17 Market notes

OPEC may extend concessions as global surplus resists

OPEC may extend concessions as global surplus resists

BoE rush in rate hike may be unjustified

US credit rating Standard & Poor’s expressed doubts that British economy needs interest rate hike saying BoE aims at specific targets such as curbing import prices growth and offsetting effects of excessive Pound devaluation.

“In general, we believe that the recent statements of the Bank of England and Mark Carney are primarily aimed at supporting the pound to reduce the pressure of imported inflation,” wrote S&P analyst. Continue reading

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26/09/17 Market notes

Growing dissent among Fed members on December hike.

Growing dissent among Fed members on December hike.

Growing dissent between Fed’s governors on the outlook of inflation pressure turned out to be in sight a few days after the Washington meeting on monetary policy. At the same time, there were two polar views with one of the members saying that inflation is now back on recovery, while the others suggested underlying inflation problems have not been resolved yet.

Both president of the Federal Reserve Bank of New York, William Dudley, and the head of the Federal Reserve Bank of Chicago, Charles Evans, noted that core readings of the US economy remain stable, both expressed support for a step-by-step increase in interest rates. Continue reading

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24/09/17 Market notes

Divergence between BoJ and ECB will push EURJPY higher

Divergence between BoJ and ECB will push EURJPY higher

Unlike european currency, which is quite resistant to hawkish Fed comments, Japanese yen substantially weakened against the US dollar while heightened geopolitical risks on the Korean Peninsula helped bears to pare down some losses. Verbal skirmish between Washington and Pyongyang once again revived appeal of safe heavens for investors. Despite the fact that almost no one believes in the war, there are risks that things may go completely wrong. Continue reading

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11/09/17 Market notes

North Korea Threat Recedes Amid Numerous Warnings From The West

North Korea Threat Recedes Amid Numerous Warnings From The West

Dollar shrugs off from massive selloff

The dollar advanced on Monday, showing signs of bottoming out from lowest levels since 2015, amid weakening threat from the hurricane Irma and concerns related to the situation on the Korean peninsula, reports Bloomberg.
North Korea threat receded, as no missiles were launched on Saturday, the anniversary of the state establishment, amid many warnings from the West. Continue reading

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05/09/17 Market notes

Aussie Gains after September RBA Decision

Aussie Gains after September RBA Decision

Housing market and September RBA decision

Aussie edged higher on Tuesday during the Asian trading session. The data on country’s current account and PMI in Chineseservice sector offered some support before the September RBA decision. AUDUSD continued upward march raising to 0.7959, while USDJPY leveled off at 109.28, losing 0.40%. Continue reading

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28/08/17 Market notes

Hurricane Harvey hits US, oil production tumbles

Hurricane Harvey hits US, oil production tumbles

Barrel of WTI fell during the Monday trading but at the same time, futures for gasoline soared to a maximum since July 2015 after energy markets assessed the impact of hurricane Harvey, which struck the US coast of the Gulf of Mexico.

Natural Disaster, worst for 50 years

At weekends, Hurricane Harvey reached the mainland and became the most powerful hurricane in the state of Texas for more than 50 years. As a result of the impact of the natural disaster, at least two people died. Massive floods occurred, the port in Houston and several oil refineries were closed. Continue reading

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14/08/17 Market notes

Gold retreat as North Korea Missile test stall

Gold retreat as North Korea Missile test stall

Fears over the North Korea missile test abated on Monday thanks to the statement of the President of South Korea, who called to subdue the nuclear ambitions of its neighbor peacefully. Influential American officials also rebuffed concerns about the inevitability of war with North Korea. Continue reading

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07/08/17 Market notes

Crude oil outlook remains gloomy

Crude oil outlook remains gloomy

Western investment funds sharply increased their bets on oil growth. For a week, the volume of long positions in crude oil has increased by $2.1 billion.

According to the Commission on Trade in Commodity Futures for the week from July 25 to August 1, hedge funds bought 42.5 thousand long contracts in their portfolios and sold 1.4 thousand short contracts. Thus, the volume of their longs rose to 365.7 thousand contracts, and shorts fell to 83.4 thousand. Thus, the net long position on oil rose to 282.4 thousand contracts or to 13.8 billion dollars.

Investment funds have been pessimistic on oil growth since April 2017. Since then, they either have been reducing longs, or did not commit any serious action. However, recent changes in portfolios have not led to significant changes in the oil market. During the same period prices of the black gold grew only by 1.2%.

Amid this, I would like to note the actions of the largest bidders. They, in turn, preferred to “short” oil. For example, the spread between the gross positions of top-4 traders increased sharply, and in favor of short contracts. As of August 1, the difference between shorts and longs jumped to 2.7 percentage points, while just a week ago it was equal to 1.5 percentage points.

The last time the largest participants of the New York Mercantile Exchange made such sharp movements in November 2015, just a few months before the turn in the oil market.

In our opinion, hedge funds can throw “black gold” even higher, but if their actions will go against the actions of the largest traders, then it is quite possible that after the upward movement a serious price collapse will occur.

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