Latest Market Commentary

December 23, 2019

Oil rigs were in the USD were up 18 in Friday’s Baker Hughes rig report. This brings the total number of oil rigs to 685 and last year at this time there were 883 rigs. This is the most rigs added in one week since back in February of 2018.

The US granted a waiver extension on sanctions of Chinese tanker companies. The tanker companies are believed to be shipping Iranian crude oil, with the biggest company being COSCO Shipping. These waivers were originally granted to allow time for companies to wind down deals and find alternatives.

This week the DOE inventory report will not be out until Friday December 27th.

UBS said its end of quarter Brent crude oi prices forecast are $60 per barrel for the first quarter of 2020 and $62 per barrel, $64 per barrel and $64 per barrel for the following three quarters. It expects WTI crude oil to trade unchanged at a $5 per barrel discount to Brent. It also estimates that the oil market will be oversupplied by 300,000 bpd in 2020.

According to the CFTC, money manager raised their net long US crude oil futures and options positions in the week to December 17. The speculator group raised its combined futures and options positions in NY and London by 43,962 contract to 295,324 during the period.

Positive for oil demand, the US Bureau of Economic Analysis reported early Friday morning that the 3rd and final estimate for Q3 2019 GDP came in at 2.1%, above economists’ estimates for a 2.0% rise. Strong consumer spending above expectations helped to increase the final Q3 2019 GDP for the US Consumer spending accounts for approximately 66% of the GD calculations.

The oil markets continue to be well supported as broader sentiment remains positive as the phase one  trade deal gets completed. Oil fundamental are also supportive  of prices as signs point to global inventories beginning to decline. This is a short trading weeks and it is very likely limited traders will be on the job so volatility could be up due to these factors. But in the overall outlook and trend of the market will likely not be changed.

Tim Danze, MFA Oil Company Hedging Manager