Technical & Fundamental Oil Reports Specialists

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Oil fundamentals overwhelm geopolitical concerns

Published Wednesday, August 13th, 2014

The equilibrium between geopolitical fears and fundamentals which has been wobbling of late became unbalanced yesterday, tipping in the direction of fundamentals which are surprisingly bearish for a period we had been warned could be tight.

International crude, as marked by Brent, is suffering the most. Yesterday it lost $1.50 to close at $103.89/bbl whilst WTI lost 71cts/bbl to close at $97.37/bbl. Huge changes in price structure have taken place over the last two months. On June 13 the prompt to 12 month spread on Brent closed at +$7/bbl and the prompt intermonth spread at +95cts/bbl. Last night the long spread closed in contango at -$1.33/bbl and the prompt spread at -87cts/bbl.

The real damage has been at the front end where Brent has lost $10.39/bbl since June 13 compared to a 12 month ahead loss of only $2.06/bbl. Over the same period the Brent/Dubai EFS premium has fallen from +$4.87/bbl to +$1/bbl.

Events in Russia, Iraq and Gaza have not deprived the world of any serious volume of oil, Libya appears to be holding on to a production level of around 500,000 bpd, US domestic production just keeps increasing every day and OPEC is pumping at over 30 mbpd. At the same time the fact that demand growth is falling is being recognised by the forecasting agencies.

to read the rest of the report, please click here 

Posted by David Hufton