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Bullish market sentiment remains, short-term dark horse could be meeting comments

By A/S Global Risk Management.



Michael Poulson, Oil Risk Manager at A/S Global Risk Management. Image credit: A/S Global Risk Management


Updated on 21 Sep 2017 09:25 GMT

By Michael Poulson, A/S Global Risk Management

Prior to tomorrow's OPEC / non-OPEC panel meeting, the Iraqi oil minister allegedly mentioned a potential extension of production cuts and deepening the cuts. Even if this should not be implemented tomorrow - as this is a monitoring committee meeting - the market still reacts to such statements.

The futures market is starting to show backwardation, which usually indicates a shortage in supply.

Also, in yesterday's weekly U.S. oil inventory report from the Energy Information Administration (EIA), there was a large draw in US product inventories, but builds in crude oil inventories.These are likely explanations on why the crude price is at this level right now.

The US oil market seems on a path of rebalancing on top of the hurricanes; US refinery utilization rates are aiming at normal levels as the rate is up about 5% from last week, but still there is 7-8% to go. This means that there is less demand for US crude, but on the other hand a shortage on refined products - explaining the current product price level. For now, the bullishness is likely in control driving the Brent to current levels.

The draw in U.S. gasoline stocks comes at a time where U.S. refineries have been operating below 80% for 2 weeks, which is historically low. But the gasoline price has not increased dramatically, suggesting that supplies to the U.S. might come from elsewhere, namely Europe. As Europe is shipping more products to the US, more Brent must be used for production, which is bullish for the price. But the US refineries will most likely come back online operating at normal capacity before long.



A/S Global Risk Management is a provider of customised hedging solutions for the management of price risk on fuel expenses. The company has offices in Denmark and Singapore. For further details about its risk management products and services, please call +45 88 38 00 00 or email hedging@global-riskmanagement.com.






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