(WCTW) Speculators Vs OPEC+, We Know How The Story Ends

Speculators are doing it again. Net length position in both WTI and Brent is back to the previous historic lows.

Source: Eric Nuttall

As we've explained in our recent OMFs, the physical oil market, as it stands today, is not tight enough to sway both sentiment and balances in the bulls' favor. While the healing process is underway (higher refining margins), this takes time, and the physical market for crude has materially weakened since September (due to refinery run-cuts).

One thing we are always mindful of, however, is that the market appears to believe OPEC+ won't be able to deliver on the cuts. There seems to be a huge misconception surrounding voluntary cuts and coordinated cuts. What the market seems to misunderstand is that there is no difference.

In our analysis posted following the OPEC+ meeting, we concluded that out of all the cuts announced (nearly ~2 million b/d), we think there's a very high likelihood that OPEC+ will deliver at least ~1.5 million b/d. This would translate into OPEC+ exports falling back to the August lows.