10-09-2017, 10:52 PM
Hedge funds have become strongly bullish on the outlook for all parts of the petroleum complex, amid signs global crude stocks are declining and fuels will be short supply after hurricane-related refinery outages. But with so many fund managers already betting heavily on a further rise prices, the market has become lopsided and the risk of a sharp reversal has increased significantly (tmsnrt.rs/2jUBXpk). Hedge funds and other money managers raised their combined net long position in futures and options linked to Brent and WTI by 83 million barrels in the week to Sept. 19.
COLUMN-Hedge fund positions in oil look stretched: Kemp
After substantially improving their cost structures through 2015 and 2016, North American exploration and production (E&P) companies will demonstrate meaningful capital efficiency to the extent the West Texas Intermediate (WTI) oil price is above $50 per barrel and the Henry Hub natural gas price is at least $3.00 per MMBtu, Moody's Investors Service says. In in a new report, "Higher than $50 per barrel WTI essential for a meaningful return on capital," Moody's discusses its analysis of 37 independent US E&P companies' expected performance in terms of return on capital under various commodity price scenarios. Moody's measures capital efficiency using the leverage full cycle ratio (LFCR) metric, a function of operating cash margins and finding and development costs.
Moody's: North American E&P capital efficiency improvements require oil prices above $50 per barrel
So far, there are no signs of an actual supply disruption, but oil traded up at the start of the week on the heightened geopolitical risk. But Brent prices have only moved up into the upper-$50s because the underlying fundamentals have improved markedly in the last few months. Oil demand is robust and continues to grow even as global supplies have stagnated. The OPEC deal seems to finally be bearing fruit in the form of a sharp decline in global crude oil inventories. The oil market could finally be breaking out of a depressed pricing environment after three years of sluggishness, according to Trafigura Group, an oil trading company. “We are nearing the end of ‘lower for longer’ oil,” Ben Luckock, co-head of Group Market Risk at Trafigura said at the S&P Global Platts APPEC conference in Singapore on Tuesday. Luckock cites the fact that the oil market could lose some 9 million barrels per day (mb/d) by 2019 just from well depletion. That could leave the world short on supply, pushing up prices significantly.
Oil Prices At A Ceiling, Or Just Getting Started? | Market Armor
A recent rise for the price of oil could be set to continue, according to one commodities analyst, who believes there is now a "real rebalancing" in the market. "The fundamentals are changing and the market is rebalancing," Jodie Gunzberg, head of commodity and real asset indices at S&P Dow Jones Indices, told CNBC Wednesday. This support is coming from several sources, including OPEC whose members are complying with production cuts and China where there is demand growth, according to Gunzberg.
Oil shortages could push prices all the way to $80, commodities expert says