Sequel to a meeting held over the weekend by the Organisation of Petroleum Exporting Countries (OPEC) and allied member (OPEC +), oil price remain under pressure.
In a note this Monday ING commodities analysts said the weaker market suggests the group will fully rollover supply cuts at least into the third quarter. Analysts said weaker refinery margins will be a concern, while the dated Brent-to-frontline (DFL) swap is negative suggesting a weaker physical North Sea market.
Last week, crude oil prices close higher on Friday amidst uncertainties in the global commodities market. ICE Brent was down more than 2.2% for the week, ING said.
“The recent weakness in the market increases the likelihood of a full rollover of OPEC+ additional voluntary cuts at least through the third quarter of this year, according to ING note. Commodities strategists said expectations for such action are growing, so anything less will disappoint the market”.
They noted, however, that fundamentally the market only needs to see a partial rollover, so there is a risk that OPEC+ overtightens the market in the third quarter of the year. According to the calendar, OPEC+ was scheduled to meet on June 1 to discuss output policy, however, this meeting has been pushed back to 2 June and will also be a video conference rather than an in-person meeting.
The latest positioning data shows that speculators reduced their net long in ICE Brent by 67,252 lots over the week, leaving them with a net long of 146,250 lots as of last Tuesday. This is the smallest position speculators have held in Brent this year. The move in the week was driven fairly evenly by longs liquidating and fresh shorts entering the market.
The gross short in Brent stood at 120,561 lots last Tuesday—- the largest short since November 2020. A rollover of OPEC+ cuts would likely flush out some of these shorts, according to ING.
Get instant and latest news updates via Our WhatsApp Community or Google News online channel.