Technical & Fundamental Oil Reports Specialists

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Dumping or the elimination of high cost production?

Published Tuesday, October 20th, 2015

There was only negative news on the oil front yesterday, beginning with Chinese 3Q numbers which delivered no cheer for commodities. All the indicators that involve commodities came in below expectations making for a gloomy start to a week which sees President Xi on a state visit to the UK.

We also learnt that Saudi exports fell in August (of which more below) suggesting a drop in the demand for their oil. Adding further pressure, Sunday was the formal “adoption day” of the Iranian nuclear accord which opens the door to full ‘implementation’ and the lifting of sanctions towards the end of the year or early next year.

Speaking in Tehran the Iranian oil minister made it very clear that Iran will increase exports from day 1 of implementation reaching 500,000 bpd within a week and 1 mbpd within seven months. If additional Iranian barrels hit the market in January it will coincide with the lowest demand quarter when the OPEC consensus call is only 30.16 mbpd. The prospect is therefore of a 1Q crude surplus of 1.8 mbpd.

The Brent net spec length figures showed a similar leap to WTI numbers with a gain of 20,948 lots to 203,536. As with WTI, the weekly change was dominated by shorts covering rather than new length being taken on. It is intriguing that this year, in 25 of the 41 weeks reported to date, Brent NSL has outpaced WTI NSL. This never happened before this year and since Brent NSL was reported for the first time in June 2011.

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Posted by David Hufton