Oil prices start week with slight decline, and today, it is possible to begin the corrective phase. Let us consider the main trends and developments in the oil market.
So, first of all should pay attention to the meeting of the Minister of energy of the Russian Federation Alexander Novak with his Iranian counterpart. For this meeting a special attention, because Russia, in fact, has made it his mission to convince the world’s largest miners to freeze the production of hydrocarbons to affect world prices, and that’s just the Islamic Republic, in fact, the only one who is not ready to go to do so.
Iran only recently freed from sanctions, because of which was forced for several years to reduce the volume of production. Earlier, Iran pumped about 4 million barrels a day, after imposing restrictions, the average was 2.8 million barrels.
Literally on the eve of Iran’s oil Minister Bijan Namdar Zanganeh said that the country will regain its market share, and then will be ready to abide by the agreements about the freezing of production on an equal basis with other parties to the agreement.
He also asked that other oil countries “have left Iran alone.” Tehran may consider the possibility of limiting production only after restoring the level of 4 million barrels per day.
Thus, there is a substantial risk that attempts by oil exporters to negotiate will be futile and it will be a good reason for market participants to play down, especially that from a technical point of view it would be very logical.
Drilling rigs
The total number of working rigs in the United States (not just oil) dropped to the lowest level in 41 years, i.e. since the beginning of statistics.
And the number of working oil rigs fell last week to 3 to 386 pieces, which was the lowest level since December 2009, the Decline is observed for 12 weeks in a row. However, this does not mean that in the near future we will not see growth in the number of operating drilling.
But the volume of production and number of rigs has long been living my life, so to draw any far-reaching conclusions from the statistics it is not necessary, as, however, and the statistics on the volume of positions the hedge funds, to be discussed below.
Incidentally, note that the oil producers, it seems, do not really believe in further growth. In recent years, the spread between the price of futures and spot price started to decline. This means that manufacturers are actively selling contracts for delivery in 2017, 2018 and later years, that is, trying to exploit the current growth in oil prices.
Hedge funds cut short positions at a record pace
For the week of 8 March, the hedge funds have reduced short positions in options and futures for WTI crude oil for 25%, or 38,232 thousand contracts. Such data are cited by the Commission for futures trading in the U.S. (CFTC). This is a record since the beginning of the statistics — since 2006, the Previous such record was set in April last year, when after a strong decline in oil prices, as now, we saw a sharp bounce up.
Overall there is nothing surprising, because in the game for a fall was attended by a huge number of traders, and now they have to liquidate their positions. Reducing short positions is observed for the fifth week in a row, and during this time they decreased by 43%. Oil prices meanwhile from the January lows has already grown by about 50%. And in General over the past year, this is not the first case when the first traders accumulate short positions on oil, and then close them EN masse. As a rule, this coincides with the movement of the price. Simply put, the big players “take out” from the market smaller.
