It has been reported that for the second straight week, the main oil futures contracts have seen a marked rejuvenation in open interest, primarily coming from bullish long positions.
It was inferred that despite ongoing fears of an economic recession, traders believe that the selloff earlier this month was overdone.
This means the markets are largely ignoring the return of Libyan oil. In addition, Europe’s natural gas woes have strengthened demand prospects for middle distillates, with diesel switching in the winter months now a very real possibility.
The spread between the world’s two leading crude benchmarks, Brent and WTI, is as wide as it has been in more than three years, moving as far as US$8.50 per barrel recently.
Previous strength in WTI has been tangibly beaten down by weakening gasoline demand and several consecutive stocks builds.
US crude exports have seen a substantial drop compared to record highs seen in April-May, but the wide Brent-WTI spread will provide a huge boost to European buying of the American benchmark.
The OPEC+ group had a massive shortfall of 2.84 million barrels per day (bpd) in June between actual production and the target oil output level as part of the deal.
As OPEC+ is unwinding its cuts, more and more members are falling further behind their quotas due to a lack of capacity or investment in supply.
In June, the compliance rate at the OPEC+ group soared to 320% from an estimated 256% in May, according to Argus’s sources, suggesting that the gap between nameplate production per the agreement and actual production continues to widen.
Per an Argus survey from earlier this month, OPEC+ pumped more than 2.5 million bpd below its target in June, despite a rebound in Russia’s oil production that helped the group’s output rise by 730,000 bpd from May.
Russia’s oil production rose in June and was approaching the levels last seen in February, just before the Russian invasion of Ukraine. Most of the rebound was due to higher intake from domestic refiners.
The ten OPEC producers in the OPEC+ pact pumped 24.8 million bpd of crude oil in June, with production falling one million bpd short of the target levels.
Top OPEC producer Saudi Arabia naturally raised its crude oil production by the most in June compared to May.
Yet, per OPEC’s secondary sources, even the Saudis were lagging behind their quota for June. Saudi Arabia’s oil production rose by 159,000 bpd to 10.585 million bpd. To compare, the Saudi target was 10.663 million bpd, the Kingdom was 78,000 bpd below its quota last month using secondary source figures.
OPEC+ is expected to continue to underperform by a lot compared to its production targets for July and August after the group decided to accelerate the rollback of the cuts and have those completely unwound by the end of August.
