Daily Oil Market Report - 16th November

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Too early for a price rebound: Friday was a relatively dull day given the very exciting week oil and natural gas markets had. After the 12 day losing streak finally ended for WTI, prices were unchanged for WTI while Brent gained 14c.

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The big news over the weekend was the explosive report from the CIA that Mohammed Bin Salman (MBS) was behind the Khashoggi murder. MBS was expecting this story to eventually lose interest, but it still remains in the headlines. Its still too early to say what this means for the oil markets, however it might make Saudi cut deeper than expected in the upcoming OPEC meeting in order to push prices higher which Trump wouldn’t like.

On Friday, there was news that Kirkuk might be restarting oil exports from Ceyhan again. These fields have been shut for over a year and can add 200KBD to Iraqi production. So far, they plan to increase production by an extra 50-100KBD. Iraqi production is already at multi year highs and we should see new highs set until the decision from the upcoming meeting gets enforced. This latest truce between KRG and Iraq was reportedly done due to US pressure as they try to bring previously stranded barrels back to the market. In return, they will turn a blind eye on trade between Iraq and Iran.

OMV’s CEO told reporters in London that he doesn’t see global oil demand rising by more than 1 million barrels per day. If he is right, that would lead to very weak 2019 global balances despite what OPEC do in two week’s time. We feel people are being too pessimistic for demand next year especially as there should be some demand resurgence given the recent low prices. However, saying that there were protests in France over the weekend due to high diesel prices. Prices have hit €1.50/l, despite the low flat price due to high taxes. One person died during the protests but these protests are also being seen as wider resentment again Macron.

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We don’t look at options much but this week option volatility for natural gas and oil hit multi year highs. This was particularly in the case of natural gas where the cold snap in the US led to prices surge by over 30% during the week and then dropping 12% by Friday. This surge in natural gas vol caused some serious pain for many investors. Optionsellers.com which managed a portfolio for 290 clients, went bust due to this spike. Read more about the rapid and spectacular fall on this twitter thread. Read more below, its absolutely fascinating and shocking at the same time.

https://twitter.com/GunjanJS/status/1063586231114698753

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Managed Money Spec Length: 7th Weekly decline in managed money for crude and products. This spec length liquidation is now at peak panic levels. Spec length in the 4 main products is down by 50% in the last 7 weeks. Despite this sharp drop, we have seen lower absolute spec levels in July 2017. We have broken down the components below for Brent and WTI. Interesting to see shorts increase their position for Brent and WTI. Brent longs continued to liquidate while Nymex WTI saw a small increase in length, which seems counter intuitive.

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