Article / 08 August 2016 at 14:04 GMT

Short-covering boosts oil, but Q3 typically soft: Hansen Team / Saxo Bank
  • WTI crude oil rises to $42.71/barrel, Brent climbs north of $45/b
  • US oil production has stabilised; Russian, Opec levels continue to increase
  • Third quarter typically a challenging one for crude oil: Hansen

Crude oil
By the team

Oil saw its third straight day of European-session gains today, with WTI prices rising from around $41.80/barrel to $42.78 as of press time (Brent prices climbed from just over $44b/ to just over $45).

In Saxo Bank head of commodity stategy Ole Hansen's view, today's main drivers have been "verbal intervention, the stronger-than-expected US jobs report on Friday, and the latest COT report that showed a strong buildup in short positions".

While Hansen reports that "the overhang of supply has not gone away, so short covering seems to be the main reason [behind today's rise]," he also notes that "while the net-long position in oil has been falling, both long and short positions have been rising... [this] does mean that longer investors are dipping their toes in again".

Click to enlarge:
Crude oil
Looking at the overall supply landscape, Hansen says that "US production has stabilsed while Opec and Russia continue to increase production, so we are seeing the rebalancing process once again delayed meaning lower prices for longer".

One factor Hansen sees as potentially challenging for WTI in particular concerns recent moves made by US shale oil firms. "US high cost producers have during the past few months had the opportunity to forward hedge their production above $50 and depending on the size of this hedging programme, this may lead to a greater resilience despite the renewed price weakness," says Saxo's commodities head.

Brent crude
While there is reason to believe that the current situation could see some support develop around $40/b, Hansen ultimately feels that "the third quarter tends to be challenging due to the seasonal slowdown in refinery demand, which tend to lead to rising inventories." 

— Edited by Michael McKenna

Ole Hansen is head of commodity strategy at Saxo Bank


The Saxo Bank Group entities each provide execution-only service and access to permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on or as a result of the use of the Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. When trading through your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of ourtrading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws. Please read our disclaimers:
- Notification on Non-Independent Invetment Research
- Full disclaimer
- 沪ICP备13028953号-1

Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail