Oil: 3rd losing week; Market’s loudest bulls admit buyers have vanished
Oil Bulls Turn Bearish
It’s not every day that you get to read a Phil Flynn note that’s virtually bearish on oil. But to hear one of the market’s loudest oil bulls admit that people have been fleeing the long crude game like rats abandoning a sinking ship should be a wake-up call to those who kept drumming for a return to $100 pricing in recent weeks.
Changing Market Sentiment
“The petroleum buyers are gone, unless you are talking oil call options, as supply and demand take a back seat to rising macroeconomic fears,” Flynn wrote as crude futures headed for a third straight week of losses despite rising over the past two sessions after Thursday’s four-month lows.
Market Performance
New York-traded , or WTI, crude for December delivery, settled at $77.17 per barrel, up $1.43, or 1.9% on the day, adding to Wednesday’s 0.5% rise. For the week though, WTI was down 4.1%, after prior back-to-back weekly losses 6% and 3%. That came after the US crude benchmark 11% tumble for October.
Global Impact
As WTI settled, UK-origin crude’s most-active January contract was at $81.66, up $1.65, or 2.1% after Thursday’s 0.6% gain. For the week, Brent was down 3.8%, after back-to-back weekly losses of 6% and 2%. Prior to that, the global crude benchmark lost 11% in October.
Market Uncertainty
With the US Treasury yield rebounding over the past two sessions, the Fed may have to offer much higher rates to get investors interested in US bonds — adding to market unease that the central bank’s rate hikes may not be over, said Flynn.
Speculative Positioning
Pierre Andurand, one of the most closely-followed hedge fund managers in oil, also pointed out that, “net long speculative positioning in oil (crude products, options delta futures) is fast approaching the lowest since this data exists (2011). The managed money category in the COT (representing hedge funds) sold about 400 barrels in the last 6 weeks.
Market Analysis
Most worthy was Andurand’s question on “what drives this selling?”, said Lynn. The hedge fund said it was “hard to identify a clear reason”, adding: “There have been macroeconomic worries for a while now. However, demand growth has consistently been revised up during the year, and mobility data shows an acceleration in demand and demand growth. Some point to softness in the physical market.”
OPEC+ Meeting
And while producer alliance OPEC+ is having an all-important meeting on Nov. 26 that could again introduce a tighter oil supply mentality, for now its exports are rising. Latest data from the cartel shows an expected seasonal rise of 180,000 barrels in shipments, led by Iraq and Iran.
(Peter Nurse and Ambar Warrick contributed to this article)
