Money managers go bearish on oil as OPEC turns on tap
Money managers have slashed bets on West Texas Intermediate crude to the lowest in more than a year, with total positioning on the United States benchmark down to a level last seen in 2015 as OPEC adopts “produce-as-much-as-you-can-mode” to offset sanctions on Iran.
The net-long position in Brent fell 12 percent to 360,785 contracts, ICE Futures Europe data show. For a fourth straight week, longs slid while shorts rose. Money managers reduced their net-long positions on benchmark U.S. petrol and on diesel by about 13 percent, according to the CFTC.
“You have sanctions on Nov. 4 that kick in and the big question is how much will those other countries” produce to make up the gap, Mark Watkins, who helps oversee $151 billion at U.S. Bank Wealth Management told Bloomberg. At the same time, “the global economy is showing some signs of stress and that’s making investors just a little bit more nervous as a whole.”
Saudi Arabia already boosted oil production to 10.7 million barrels a day, near an all-time high, and it can increase it even more to help plug any supply shortfalls due to U.S. sanctions against Iran, according to Khalid Al-Falih, Saudi Arabia’s energy minister.
Iraq also chimed in and said it will increase oil output. OPEC has been raising production since May. Yet, OPEC later said the rise in oil inventories in recent weeks, coupled with fears about an economic slowdown, “may require changing course.”
A crude oil loading programme seen by Reuters indicates Nigeria Bonny Light crude oil stream will load 263, 483 barrels per day in December, up from 169, 467 bpd originally scheduled for November, and Forcados crude oil have been set at 217, 900 bpd in December, versus 210, 500bpd in November.
“The market is grappling with the fundamental question: Are we oversupplied or under-supplied?” Tamar Essner, an analyst at Nasdaq Inc. in New York said in response to questions from Bloomberg. “We’ve been given very mixed signals from major producers.”
Hedge funds’ net-long position, the difference between bets on higher prices and wagers on a drop — in WTI crude tumbled 15 percent to 206,295 futures and options in the week ended Oct. 23, according to the U.S. Commodity Futures Trading Commission. Longs dropped 9.8 percent to the lowest in almost three years, while shorts bumped higher by 13 percent.
However, Nigeria’s oil and gas sector also scaring investors off foreign investments by the non-passage of the Petroleum Industry Governance Bill (PIGB). Babatunde Ruwase, president of the Lagos Chamber of Commerce and Industry during recent visit president Muhammadu Buhari said investors were moving their capitals to countries with well-defined laws.
“Instead of giving incentives, the feelers we are getting are that the Nigeria Ports Authority (NPA) is going to levy $1 per barrel of crude and other such levies are going to be imposed. We urged them to quickly pass the law to make our oil and gas more competitive to investors” Ruwase said.
Meanwhile, Libya, one of the most volatile and politically fragmented oil producers, expects to pump as much crude by the end of next year as it did before the 2011 revolt against former strongman Moammar Al Qaddafi.
The country plans to refurbish its pipeline network and raise output at some fields to reach a target of 1.6 million barrels a day, Mustafa Sanalla, chairman National Oil Corp. said in an interview. The North African nation currently pumps 1.25 million barrels a day, he said in the eastern city of Benghazi.
“We’ve put together a plan to boost field production, including pipeline maintenance and addition of new pipelines,” Sanalla said. “We aim to reach 1.6 million barrels a day by the end of next year and this level can increase.”
If it reaches this target, Libya would be producing at the level it last maintained in the years before Qaddafi’s ouster and death and the nation’s ensuing civil war. Political divisions and internal fighting have plagued Libya since then.
STEPHEN ONYEKWELU