“Right after OPEC, U.S. producers were very active hedging," said Ben Freeman, founder of HudsonField LLC, a boutique oil merchant with offices in New York and Houston. "We are going to see a significant amount of producer hedging at this levels."
Following OPEC's agreement to cut prodiction for the first time in 8 years, front-end prices have spiked (above $50) but perhaps more notable is the unusual 'stability' in the crude curve around $54 from July 2017 to Nov 2019. For the first time since October 2014, the belly of the crude curve is in backwardation (far-months cheaper than near-months).
OPEC agrees to cut 1 mm barrels: OPEC produces averages 33 mmbpd in 2017; WTI averages $59/bbl in 2019 OPEC again fails to reach an agreement:OPEC production averages 34 mmbpd in 2017, WTI drops to $40 then rebounds to $45 in 2017
"Our base case is now that an OPEC production cut will be announced and implemented with OPEC production at 33.0 mb/d in 1H17 and a Russia freeze at 11.6 mb/d. As we have flagged previously, this leads us to reverse the direction of our 2017 oil price path: normalizing inventory levels will generate backwardation by 2Q17 and leads us to raise our 1Q and 2Q17 WTI price forecasts to $55/bbl from $45/bbl and $50/bbl previously."
For 90 min, the panicky speculator herd stampeded. Then market makers reasserted control. No, not over price--of spread! They did not manipulate the price of gold upwards. They decarried gold, that is, sold spot and bought futures.
While last week's OPEC Aligers meeting was supposed to lead a production cut, however we warned that over the most likely outcome would be a boost in production. We didn't have to wait long and earlier today Iran's IRNA news agency reported that Iran is presently exporting 2.2mbpd of crude oil but the figure could be well increased to 2.25mmbpd and that Iran would be able to increase its crude oil production to 4.2mbpd. At the same time, Libya crude oil production rose to 500k B/d, and output would liekly reach 600k b/d at end-October.
Crude oil inventories in the U.S. have fallen 23.9 million barrels since the end of April, but, as Bloomberg notes, oil bulls counting on further declines are fighting history. Over the past five years refiners' crude demand has fallen an average of 1.2 million barrels a day from the peak in July to the low in October... "The rough part will be once refineries start going into maintenance,... we aren’t drawing down inventories very fast and the pressure on prices will increase."
As China's deflationary refined product finally hits the world, and leads to a flood of gasoline and diesel across the continents, a curious development is the build up of gasoline tankers in New York City's own harbor...
What follows is how JPM manipulated the silver markets by selling the Silver contango during illiquid hours, then used their deep pockets to push settlements, then waited until margin calls made the large locals puke their positions. JPM in effect stretched the relationship between forward rates and futures spreads until they made no sense anymore. Not unlike a company trading at 50x earnings. It cannot last long. But it only has to last long enough until the guy with the position opposite you has to liquidate.
One particular energy trader - a name well-known to Zero Hedge readers - Glencore, has built up a massive inventory stake in the Brent market where it now holds an unprecedented 30% position in Brent, which it is holding for offshore storage in its tankers in hopes of pushing the price of Brent, and thus the entire energy complex higher, by limiting supply.