Crude Oil Analysis: Bearish Momentum to Continue Despite Short Term Lift

Crude Oil Analysis: Bearish Momentum to Continue Despite Short Term Lift

In the week ending November 13, hedge fund managers cut their net long position-the difference between bullish and bearish bets-in WTI Crude to the lowest since August 2017 and cut their net long position in Brent Crude to the lowest in a year and a half, according to data from exchanges and the U.S. Commodity Futures Trading Commission (CFTC) compiled by Bloomberg.

Brent fell as much as 7.6%, or $5.08 a barrel, to hit $61.71, its lowest point in more than 11 months. The country's overall purchases from Iran in the April-October period, the first seven months of the current fiscal year, rose 34 percent.

On Monday, crude oil futures ended up $0.52, or 0.9%, at $57.20 a barrel. WTI prices have fallen more than 30 percent from their near-four-year peaks in early October, weighed down by surging supply and the selloff in risk assets worldwide.

"When the stock market comes off 8%-9%, it tends to conjure up images of a weak global economy and that feeds into expectations of weaker than expected oil demand", says Jim Ritterbusch of Ritterbusch and Associates.

Investors fled oil in droves on Tuesday, repelled by a toxic mix that included a global sell-off in stocks, rising doubts on OPEC's commitment to production cuts and escalating trade tensions.

Fiona Cincotta, senior market analyst at City Index, said yesterday: 'Fears of slowing global growth are fuelling concerns over global demand, just at a time when Saudi Arabia, Russia and the United States continue to ramp up production'.

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Amid the uncertainty, financial traders have become wary of oil markets, seeing further price downside risks from the growth in USA shale production as well as the deteriorating economic outlook. Meanwhile, US President Donald Trump said Saudi Arabia has been "very responsive" to his requests to keep prices low, calling into question Opec's resolve to trim supply. Citing unnamed sources, the report also said the South Koreans are negotiating 2019 supply contracts with Tehran. Saudi Arabia had previously sought crude output curbs of about 1 million barrels a day, while Russian Federation signaled the need for a "balanced decision".

The American Petroleum Institute (API) said on Tuesday that US crude stocks last week fell by 1.5 million barrels, easing concerns for now that a supply glut is building up.

US crude oil production has soared by nearly 25 percent this year, to a record 11.7 million barrels per day (bpd).

The Opec envoy for the United Arab Emirates said it was very likely that the group would reduce output but the exact level had yet to be decided. With OPEC and its allies scheduled to meet in Vienna early December to discuss output plans, the International Energy Agency warned this week that cutting supplies may have some negative implications.

"We are entering an unprecedented period of uncertainty in oil markets", IEA Executive Director Fatih Birol told a conference in Norway on Monday.

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