With OPEC ministers meeting this Friday, 22 June, all eyes will be on Vienna to see how much more supply is likely to come online.
For the past several months, we’ve been telling you that WTI should fall back into the mid US$50 range this northern summer. That’s partly based on OPEC upping production. And partly on record US production not looking to stall anytime soon.
Of course, not everyone agrees.
As Bloomberg reported on Saturday, ‘After two months of cutting bets on rising prices, hedge funds are feeling optimistic again as OPEC prepares to meet.’
As you can see in the chart below (if you have really good eyes), net-long position on Brent rose 4.1%.
Oil market volatility ahead?
By next week, we’ll know if the hedge funds were right to be optimistic on rising oil prices. But I wouldn’t invest alongside them.
For one thing, Russia’s economy can use every rouble it can generate. And with the reduced output from Iran and Venezuela, it’s an opportune time for the Russians to pump more…a lot more…without crashing the price.
‘“The Russians are now pushing for a bigger increase than what we expected earlier, and OPEC is divided now,” said John Kilduff, a partner at Again Capital LLC… The Russians are suggesting the 24-nation coalition that began cutting output about 18 months ago lift daily production by 1.5 million barrels, the same amount the International Energy Agency expects to disappear as economic and political crises seize Venezuela and Iran.’
Perhaps Vladimir Putin has been reading Trump’s tweets slamming OPEC for artificially boosting the price of oil.
Or perhaps the two leaders have even been colluding…
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