|

Oil: Gulf supply recovery challenges oversupply narrative – Commerzbank

Commerzbank’s Carsten Fritsch highlights a rapid recovery in Gulf oil production and exports following the US–Iran agreement, with Brent moving into contango and Saudi Arabia slashing its OSP for Asian buyers. Despite sharply higher observed flows, Fritsch argues that mine clearance, restricted tanker traffic and stock replenishment needs mean the Oil market is unlikely to face a genuine oversupply in the short term.

Gulf output rebounds but risks linger

"Price signals also suggest that oil supplies have risen more sharply than the official data indicate. This is because the front end of the Brent forward curve is in contango. Initially, only the first two futures contracts were affected."

"Last week, however, the contango structure extended to the first four contracts. Another indication could be Saudi Arabia’s sharp cut in the official selling prices (OSP) for August. OPEC’s largest producer is offering Asian buyers a discount of USD 1.5 per barrel on Arab Light compared with the Oman/Dubai benchmark."

"We are therefore sceptical that there will be an oversupply in the short term, as the forward curve currently prices in. Furthermore, the necessary replenishment of stocks is likely to absorb a considerable portion of the oversupply expected next year. The required volume is likely to be around 450 million barrels."

"Over a six-month period, this represents an additional boost to demand of around 2.5 million barrels per day. Author: Carsten Fritsch"

"According to Bloomberg, since the agreement was signed nearly three weeks ago, the total has been almost 90 million barrels, or 4.7 million barrels per day. Yesterday, 13.8 million barrels were recorded – the highest volume of supplies since the end of February."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

More from FXStreet Insights Team
Share:

Editor's Picks

GBP/USD falters ahead 1.3400

GBP/USD has advanced just past the 1.3400 barrier before losing some momentum on Tuesday. Cable has since edged lower to trade around 1.3380 as investors turned more cautious following reports that Iran had targeted commercial vessels attempting to transit the Strait of Hormuz.

EUR/USD treads water near 1.1440

EUR/USD struggles to gather bullish momentum on Tuesday, trading in a tight range around 1.1400. The pair lacks clear direction amid the equally vacillating price action in the US Dollar, all against the backdrop of renewed tensions in the Strait of Hormuz and a sell-off in Asian technology stocks.

Gold picks up pace, retargets $4,200

Gold bounces off earlier lows and hovers around the $4,180 region per troy ounce on Tuesday. Fresh geopolitical effervescence lend support to inflation concerns and seem to limit the yellow metal’s bull run for now.

Bitcoin: BTC struggles despite renewed ETF inflows as Strategy sale impact fades
Bitcoin (BTC) falls below $64,000 on Tuesday, erasing part of the recent gains following six consecutive days of price rises. Institutional demand shows signs of recovery, with spot ETFs recording a second day of inflows through Monday after weeks of outflows.
Bye, forward guidance: How to trade when central banks choose silence
Central banks have spent years telling markets what might come next. Now, traders face the possibility that they say a lot less. From the Federal Reserve to the European Central Bank and the Bank of England, policymakers are pushing back against forward guidance, arguing that the current world demands more flexibility.
Bye, forward guidance: How to trade when central banks choose silence

Central banks have spent years telling markets what might come next. Now, traders face the possibility that they say a lot less. From the Federal Reserve to the European Central Bank and the Bank of England, policymakers are pushing back against forward guidance.