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20 Mar 2017 10:45
Crude resumes slide as trading begins in Asia Monday – Vandana Hari

1. Crude futures were back on a slippery slope early Monday in Asia after a shortlived pause Friday from a near-two-week rout, but unable to shake off the negative sentiment hanging over the market, principally in view of the uncertainty surrounding the extension of the 1.8 million b/d of OPEC/non-OPEC output cuts beyond June, while record-high global oil inventories appear to be declining only gradually and a rising US crude output threatens to offset at least a part of the orchestrated supply curbs. An 8-9% slide in Brent and WTI crude futures since March 6, if sustained or extended, could also threaten discipline within OPEC and its 11 non-OPEC to adhere to their pledged cuts, prompting further sell-off.

2. The refusal by Saudi and Russian energy ministers as well as the OPEC secretary-general to commit to an extension of the OPEC/non-OPEC cuts, a big question for the market as the producers’ output curb agreements close in on the half-way mark, continues to cast a shadow over the prospects of a speedy draining of oil inventories and an accelerated rebalancing of the market. Though some of the OPEC members have indicated their willingness to prolong the cuts, comments by Saudi Arabia and Russia, world’s largest crude producers and effectively leaders of the OPEC and non-OPEC blocs in the production restraint deals, carry far more weight. The situation has also thrown into sharp relief the OPEC and non-OPEC members of the pacts that are still far short of meeting their reduction targets, including Russia, Iraq and the UAE. Strong compliance in the initial six-month duration of the agreements seems to be a pre-requisite for the Saudis to consider a roll-over.

3. May ICE Brent futures were trading around $51.44/barrel at 0400 GMT (12 noon SGT, 9.30 am IST) Monday, down 32 cents from Friday’s close. April WTI was changing hands around $48.36, a drop of 42 cents. The contracts ended 2 cents and 3 cents higher respectively Friday.

4. "Non-commercial" or speculative traders reduced their net long positions in WTI futures for the third week in a row to March 14, the latest data from the Chicago Mercantile Exchange showed. Though still net long on WTI futures by almost as much as the "commercial" players are net short, the speculators slashed their net length to the equivalent of about 434 million barrels, or 22% below the historic high accumulated February 21.

5. The US added 14 oil rigs in the week ended March 17, Baker Hughes data showed, adding to the bearish sentiment in the market.

Data In Sight

Vandana Hari

Founder, Vanda Insights


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