Brent oil risk skewed to the downside – #SaxoStrats
A fully priced in Opec deal leaves the risk in crude oil skewed to the downside. In my latest crude oil update I highlighted the emerging danger signals which could potentially trigger some short-term oil price weakness:
- Libyan output is surging and could potentially rise by what Opec promised to cut.
- Iraq has just like Iran, Nigeria and Libya asked to be exempt from cutting production as it fights Islamic militants.
- Rising US rig count and active forward hedging could see US production stabilise sooner than expected.
- The prompt contango spread in Brent crude has widened to the highest this year, a sign of oversupply.
- Hedge funds hold a record combined net-long position in Brent and WTI crude oil. The gross-short has hit a level which indicates that only limited support from short-covering can now be expected.
Time horizon: 1 to 2 weeks
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