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Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

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Oil Off To Bad Start Of The Week As Dollar Gains Strength

On the 84th birthday of John Williams, the crude complex is looking anything but composed. There are lots of reasons for cheer today – Chinese Lunar New Year (hark, year of the monkey), the Rio Carnival, to name two – but price action in financial markets is not one of them. As dollar strength returns and economic concerns are stoked, crude prices are starting the week looking lower.

There is the usual post-Nonfarm Friday dearth of U.S. economic data, with focus for the crude complex shifting instead to oil-specific releases this week. Today we get the EIA’s drilling productivity report, followed by its Short Term Energy Outlook tomorrow. The IEA also releases their monthly oil market report tomorrow, while OPEC delivers theirs on Wednesday. Related: U.S. Rig Count In Free Fall: Plunges By 48 In One Week

All of these reports should underscore the current overarching themes of ongoing oversupply, and demand concerns. One economic data point of note out today has been Indian Q3 economic growth, which came in just below Q2’s level of 7.4 percent YoY, but in line with consensus at 7.3 percent.

The latest CFTC data show that the total number of speculative contracts reached their highest level since data began in 2006. Speculative short positions rebounded to just shy of their record three weeks ago, while longs reached their highest level since June. This increase in volume doesn’t really give us a huge amount of insight, pointing to growing conviction among both the bulls and the bears.

(Click to enlarge) Related: Conventional And Vertical Well Analysis

As earnings season continues, eighteen of the top 30 U.S. oil companies by output have released quarterly results, with an average budget reduction of 40 percent. The capex cuts are running the gamut of the industry, with the oil majors very much in this mix:

Finally, after nothing (unsurprisingly) materialized from talks between Saudi Arabia and Venezuela over the weekend, it is rhetoric out of Iran which is providing food for thought. With Western sanctions lifted, Iran is looking to claw back its market share in Europe; it plans to sell 300,000 barrels per day of oil into the region, according to its oil minister, Bijan Zanganeh. Not only has it just signed agreements with Total, Cepsa, and Litasco (Total is set to start receiving 160,000 bpd as of February 16th), but it has also stipulated it will charge for its oil in euros, as it attempts to extricate itself from dealings with the U.S. (or in U.S. dollars).

By Matt Smith

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