2017: PRICES WILL RISE
Hedge funds added the most bullish oil bets since April on optimism that the global oversupply will disappear as producers slow output.
Money managers boosted their net-long position by 16,855 contracts to 132,857 futures and options in the week ending Sept. 8, according to data from the Commodity Futures Trading Commission.
The world is "not awash in oil," Andy Hall, hedge fund manager and noted oil bull, said this month in a letter to investors. The U.S. and other nations outside of OPEC will reduce output next year by the most since since 1992, according to the International Energy Agency. The U.S. government released new output estimates wiping out 13 million barrels of production from the first half of the year.
"People are beginning to see significant declines in production figures as a result of the declining rig count, and you can expect that trend to continue through the balance of the year," Andy Lipow, president of Lipow Oil Associates LLC, said by phone from Houston. "If you were short, you might have made your money and covered your positions."
The U.S. benchmark oil contract rose 1.2 percent in the report week to $45.94 a barrel on the New York Mercantile Exchange. The contract was at $44.55 a barrel, down 8 cents, as of 2:22 p.m. in Sydney on Monday.
The U.S. Energy Information Administration unveiled a new crude production report on Aug. 31, relying on direct surveys of drillers, that showed production was about 87,000 barrels a day less than previously thought during the first five months of the year.
U.S. output could sink by 400,000 barrels a day next year as the price rout extends a slump in drilling, the IEA said in a monthly report. Global demand is expected to grow 1.7 million barrels a day this year, the most in five years. Combined with falling supply, that will siphon off inventories in the second half of 2016.
"When you look forward to 2017, the market looks much more in balance," Lipow said.
Money managers reduced short positions, or bets that prices will fall, by 10,603 contracts, CFTC data showed. Long positions increased by 6,252.
In other markets, net bullish bets on Nymex gasoline slid 2.3 percent to 16,000, CFTC data show. Futures climbed 0.5 percent to $1.4021 a gallon. Net bearish wagers on U.S. ultra low sulfur diesel contracted by 13 percent to 25,073 contracts. Diesel futures advanced 1 percent to $1.5938 a gallon.
Money managers ignored signs seen by analysts at Goldman Sachs Group that caused them to say in a recent research note that the overhang in global supply could push oil prices into the $20s.
Goldman trimmed its 2016 estimate for WTI on Sept. 11 to $45 a barrel from a May projection of $57 on the expectation that OPEC production growth, resilient supply from outside the group and slowing demand expansion will prolong the the glut.
"When you look at the global balance, you still see a surplus," Tim Evans, an energy analyst at Citi Futures Perspective in New York, said. "That's still the big picture here."
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GAZPROM - The parties discussed relevant issues related to bilateral cooperation, including the Baltic LNG project. Emphasis was placed on the priority measures aimed at developing a joint design concept (pre-FEED).
BHGE - U.S. Rig Count is up 11 rigs from last week to 1,063, with oil rigs up 8 to 869, gas rigs up 4 to 193, and miscellaneous rigs down 1 to 1. Canada Rig Count is up 13 rigs from last week to 195, with oil rigs up 8 to 127 and gas rigs up 5 to 68.
REUTERS - Brent crude futures had risen $1.02 cents, or 1.3 percent, to $81.28 a barrel by 0637 GMT. The contract dropped 3.4 percent on Thursday following sharp falls in equity markets and indications that supply concerns have been overblown. U.S. West Texas Intermediate (WTI) crude futures were up 80 cents, or 1.1 percent, at $71.77 a barrel, after a 3 percent fall in the previous session. WTI is on track for a 3.5 percent drop this week.
EIA - Brent crude oil spot prices averaged $79 per barrel (b) in September, up $6/b from August. EIA expects Brent spot prices will average $74/b in 2018 and $75/b in 2019. EIA expects West Texas Intermediate (WTI) crude oil prices will average about $6/b lower than Brent prices in 2018 and in 2019.