WTI oil price hits 3-year low ahead of Trump-Harris showdown

Oil prices fell more than 4% today to a 3-year low as trader sentiment continued to sour ahead of tonight’s highly anticipated US presidential debate between Donald Trump and Kamala Harris, with bearish sentiment easing to May lows many years as traders continue to overreact to everything. negative development and ignoring relatively healthy foundations.

Indeed, hedge funds and other money managers have become the most bullish on crude oil since the CFTC began publish information on market positioning, with speculative crude currently extremely short. Brent and WTI net long totaled just 139,242 lots in the week ended September 3; net speculative longs on the four Brent and WTI contracts recorded just 2.3% of open interest, the lowest level since early 2011 and 2 percentage points below the pandemic-era low.

Net sales last week were 108.8 million barrels (mb), bringing cumulative net sales in the last eight weeks at 311.2 mb. Meanwhile, commodity analysts at Standard Chartered reported that the bank’s proprietary crude oil positioning index fell to -100.0 for the first time this year. According to analysts, the previous time their positioning index reached -100.0 was in December 2023, immediately followed by a sharp rise. However, here’s the bad news: the index hit -100.0 three times in Q2 2023, and the low in that cycle wasn’t reached until a week after the third occurrence, meaning there’s still room for net sale further. The positioning for ICE Brent is dire at -93.9, but it is considerably lighter for NYMEX WTI at -51.8, with a speculative long-short ratio for WTI still well above all-time lows.

According to StanChart, the current extreme in crude positioning is based on (incorrect) expectations of a looming crude glut, as well as lingering fears of a severe economic discontinuity. While it will take time for oil markets to start paying attention to real fundamentals, the positioning has become extreme enough to skew price risks to the upside.

StanChart points out that there is little evidence of an approaching economic cliff in the latest Energy Information Administration (EIA) weekly datathe main negatives of the report being the counter-seasonal increase in gasoline inventories and the decline in implied demand by weight. The strongest part of the latest release was crude oil, with a flow balance of -1.816 mb/d.

OPEC+ postpones production increase plans

One of the most important developments in the oil markets in the last week was the announcement that the OPEC+ oil alliance agreed to postpone plans to increase production by 180,000 barrels per day in October as part of a program to gradually return 2.2 million barrels per day to the market in the coming months. The 2.2 million bpd cut — implemented in the second and third quarters — was scheduled to expire at the end of this month. Saudi Arabia, the United Arab Emirates, Russia, Iraq, Kazakhstan, Kuwait, Oman and Algeria have committed to the voluntary reduction that is not part of the official policy that binds all members of the OPEC+ coalition.

Related: Permian Basin gas pipeline capacity set to grow with new projects

Unusually, the extended curbs failed to generate any momentum, with the sell-off continuing and oil prices falling back below $70 a barrel. According to Ben Luckock, global head of oil at oil and commodity trading firm Trafigura, the OPEC+ announcement failed to generate excitement as the outlook for oil balances was “not great”. Earlier, OPEC cut its forecasts for global oil demand growth in both 2024 and 2025, revising the outlook for this year to a still-healthy 2.03 million b/d, while cutting the number from next year to 1.74 million b/d. As the oil market gathered in Singapore this week for the annual Appec conference, Luckock correctly predicted that oil would enter the 60s soon, depressed by weakening Chinese demand.

Even the recent removal of about 700,000 bpd from the markets failed to trigger the stagnant rise in oil prices. Libya has yet to resume oil exports two weeks after the Haftar clan stalled production in an attempt to gain leverage over a battle for control of the Central Bank. Six engineers told the pan-Arab newspaper Asharq-Al-Awsat that exports remained halted at the ports of Es Sidra, Ras Lanouf, Hariga, Zueitina, Brega and Sirte, although some production increased to feed local energy production and to reduce the fuel shortage. According to S&P Global, crude oil production up to 230,000 bpd was restored in three eastern fields under the control of warlord Khalifa Haftar, a far cry from Libya’s output of 1.15 million b/d in July. Libyan crude exports hit multi-year highs in April, with refiners in northwest Europe and the Mediterranean appreciating Libya’s light sweet.

There are some positives, however, with the ongoing shutdown of Libyan oil exports proving beneficial for some crudes, including Azeri, African and US crudes. Specifically, Azeri and Kazakh crude prices have risen since disruptions in Libya last week as refiners sought spare barrels. Meanwhile, European Midland WTI imports reached 1.43 million barrels per day in August, good for a 24% month-on-month increase, supported in part by disruptions in Libya. U.S. WTI Midland physical crude prices firmed against WTI, with the price difference between the two grades widening to 80 cents a barrel from 60 cents just before the shutdown of Libyan oil fields.

Meanwhile, Tropical Storm Francine, which could become a Category 1 hurricane Tuesday afternoon, has shut down oil and gas production in the Gulf of Mexico. BSEE reported As of Tuesday morning, personnel were evacuated from at least 130 rigs, resulting in an outage of 412,070 bpd of crude oil and 494 MMCFD of natural gas, about 25 percent of total Gulf of Mexico production.

By Alex Kimani for Oilprice.com

More top reads from Oilprice.com