Crude Soft but Bears Have Vanished as Bulls Insist Oil Glut Has Cleared

by Ship & Bunker News Team
Tuesday April 24, 2018

Ever responsive to the casual remarks made by state leaders, traders on Tuesday caused U.S. crude to sink 1.4 percent on the strength of U.S. president Donald Trump telling French president Emmanuel Macron that there might be a chance to preserve the Iran nuclear deal after all.

During a press conference he stated that he and Macron "could have at least an agreement among ourselves fairly quickly" - and this caused West Texas Intermediate to drop 94 cents to $67.70, and Brent to fall 85 cents to $73.86.

Conversely, earlier in the day, Trump's remark that Iran will "have big problems, bigger than they've ever had before" if it restarts its nuclear program, caused Brent to spike to a 3 year high of $75.47.

But even though the dramatic spikes and plummets are ample evidence of crude's ability to easily venture into bear territory yet again given geopolitical developments, the general consensus of many experts is that bullish sentiment is on the rampage.

That was the contention of John Kemp, market analyst for Reuters, who wrote that "Hedge fund managers have never seemed so convinced that oil prices are set to rise rather than fall in the near term," and he noted that hedge funds and other money managers raised their net bullish position in the six most important futures and options contracts linked to crude and fuels prices by 45 million barrels in the week to April 20.

He also noted that "Across the six major contracts, portfolio managers hold almost 14 long positions for every short one, compared with a ratio of less than 12:1 back on January 23."

Kemp himself waded into familiar territory by saying there are plenty of reasons to be bullish, given that global oil inventories have supposedly fallen back into line and that global oil consumption is rapidly rising.

Gary Dugan, CIO of Namara Wealth Advisors, was of the same mindset: he told Bloomberg that despite relatively high crude prices currently, there is still opportunity for further upside, and he cited the by now familiar ingredients: "Inventories are back to a five year average, demand growth is stronger, compliance of OPECĀ  [the Organization of the Petroleum Exporting Countries] countries...is very strong, and other countries such as Venezuela not supplying the market.

"So you add on the geopolitical things, and this is why many forecasters are pushing the numbers up, and some even talking about $100 in the next couple of years."

Dugan avoided making any hard forecasts about how crude might perform if U.S. president Donald Trump cancels the Iran nuclear deal next month after all and imposes sanctions, preferring only to state that such sanctions could have "a range of outcomes whether it's hard or soft."

Relatively silent are the analysts and state leaders who up until recently made daily headlines with worries that high crude prices would merely further encourage U.S. shale production, cause another glut, and cause prices to fall; the new emerging sentiment, expressed earlier this week by Goldman Sachs Group Inc., is that high prices will spur demand for crude as the monies are reinvested overseas and stimulate the global economy.