Oil prices edge up
The oil market has continued its recovery today, after Saudi Arabia increased official selling prices for all its grades to all regions for December. The price increments are much higher than market expectations and give a bullish signal on supply tightness. Aramco has increased the OSP of its flagship Arab light grade for Asian buyers by US$1.4/bbl for December deliveries, to US$2.7/bbl of premium over the benchmark. Similarly, Arab Light’s premium for European and US buyers have been increased by US$2.1/bbl and US$0.5/bbl respectively for the month. OPEC’s steady approach on the output increments at 400Mbbls/d per month and stronger oil demand in global markets appears to have contributed to the increase in prices.
The US is reported to be exploring the option to release supply from Strategic Petroleum Reserves after OPEC+ resisted US calls to increase crude oil supply faster in response to the stronger demand. The Biden administration will be assessing the EIA’s STEO (Short-Term Energy Outlook) data on Tuesday before deciding on the SPR release. Turning to China, oil imports into the country softened to around 8.9MMbbls/d in October - compared to around 10MMbbls/d in September and largely on account of delays in allocation of import quotas to private refiners and lower refinery operating rates. Looking ahead, China’s oil imports could recover for the rest of the year, on fresh import quotas for private refineries, low domestic inventory and an increase in refinery operating rates to push up the supply of refined products.
Finally, positioning data shows that money managers continued to liquidate their long positions in crude oil and refined products over the last week. Managed money net longs in ICE Brent dropped by 9,690 lots over the last reporting week, the 4th consecutive drop to fall to 249,836 lots as of 2 November. The cuts were largely driven by longs liquidation as gross longs fell by 10,908 lots. Speculative net longs in NYMEX WTI also dropped, by 17,141 lots over the last week, with the reduction mostly again on the account of longs liquidation. Speculative net longs in refined products including ICE gasoil, NYMEX RBOB and NYMEX heating oil also dropped, by 11,877 lots, 5,193 lots and 5,913 lots respectively.
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