Oil Futures Rebound

by Andreas Exarheas
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas

Oil futures rebounded on Tuesday after a period of volatility and uncertainty, Christopher Tahir, a Senior Market Strategist at Exness, said in a market analysis sent to Rigzone today.

“The market has been under pressure for multiple weeks. However, changing conditions could help the market recover,” Tahir said in the analysis.

“Traders reacted to new monetary stimulus measures from China. The latter could help drive economic growth and oil consumption, potentially alleviating current demand concerns,” he added.

“This comes on top of the stimulus the Federal Reserve’s rate cut and expected monetary policy softening could provide to oil demand in the United States,” he continued.

In the analysis, Tahir noted that markets have also reacted to the increasing tensions in the Middle East “where risks of a larger conflict could potentially threaten oil supplies”.

“As a result, continuing confrontations in the region could push the market to the upside,” he said.

Tahir highlighted in the analysis that traders are also paying attention to the U.S. Gulf Coast, “where forecasts of an impending hurricane threaten oil production”.

“As a result, oil companies are evacuating staff and suspending operations in anticipation of severe weather, further adding to the market’s tightening risks,” he added.

The senior market strategist went on to state that “traders could look forward to the release of the U.S. crude oil inventory figures today and tomorrow to assess the health of the country’s oil demand”.

“While the API figures are expected to show a drawdown, a surprise could fuel volatility on the market,” he warned.

In a report sent to Rigzone on Tuesday, Bjarne Schieldrop, the Chief Commodities Analyst at Skandinaviska Enskilda Banken AB (SEB), said “Brent crude troughed out at $68.68 per barrel on 10 September and has recovered nicely since then”.

“Yesterday it traded to an intraday high of $75.17 per barrel before settling down at $73.90 per barrel. This morning it has bounced up 1.1 percent to $74.7 per barrel on the back of China stimulus with comparable industrial metal gains,” he added.

“The stimulus is no big bazooka setting commodity prices on fire but rather aimed at carrying the Chinese economy to its target growth of five percent,” Schieldrop continued.

Shieldrop warned in the report that speculators were net short Brent crude for a second week in a row as of Tuesday last week.

“Since data started in 2011 they have never been net short before,” he highlighted in the report.

“It’s an ultra-bearish positioning with investors convinced that there is more downside ahead. The oil market isn’t in surplus here and now. More like balanced,” he added.

“Bets are that the market will be in surplus towards the end of Q4-24 and yet more in 2025 with weak demand growth and robust non-OPEC+ supply growth,” he went on to state.

Schieldrop noted in the report that OPEC+ was quick to modify its planned 2.2 million barrel per day production increase when Brent crude passed $75 per barrel on its way down to $68.68 per barrel.

“The implied information in that modification is that the group was ready to defend the oil price around $75 per barrel through modifications to its planned increase in supply,” he said in the report, but pointed out that “the modifications were minor”.

“Rather than starting to lift production from October, the group will start lifting its production in December. Still by 2.2 million barrels per day and gradually over 12 months. That is way too much in our view. It needs to modify it further. Reduced further,” he added.

Schieldrop warned in the report that the planned increase by OPEC+ is hanging over the market as a dark cloud. 

“If the group sticks to that plan then we’ll have a much lower oil price than $75 per barrel in 2025,” he said.

“It probably shouldn’t increase its production by more than 0.7 million barrels per day over the 12 months from Dec-24. But the way forward to make the group modify its current plan is probably through price-pain. I.e. first the oil price moves down. Then OPEC+ modifies its plans,” he added.

by Andreas Exarheas
click here to read this article at Rigzone.com
*this article was not written by Roseland Oil & Gas