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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 Hits 11 Year Lows As Glut Worsens

Five hundred and twelve years after the birth of Nostradamus, and financial markets remain just as ever hard to predict. The crude complex, however, is somewhat less surprising, heading lower for a seventh consecutive day as oversupply woes weigh heavy (again, again, again).

In terms of overnight economic data flow, Japanese industrial production was in line with consensus at +1.4 percent (YoY) for October, while Indian inflation for November ticked up to +5.41 percent YoY (from 5.0 percent percent in October). Across to Europe, and Eurozone industrial production came in better than expected for October, up 1.9 percent (YoY), versus consensus of 1.3 percent. We’ve nothing-nada-nil of note out in the U.S. today:

Eurozone Industrial Production (source: investing.com)

This week could see all sorts of historic events; not only are we likely to see the lift-off of U.S. interest rate hikes, but we could also see Congress lifting the nation’s 40-year-old ban on oil exports. The deal is expected to be part of legislation passed this week, which is likely to be sweetened by the extension of wind and solar tax credits among other factors. Related: Tesla’s License Plate Mystery Debunked

The latest CFTC data show the elastic band of short positions continuing to get stretched. Speculative short positions increased by 5.8 percent, a new record, while net longs slipped to a five-year low. As the chart below illustrates, while key benchmarks of WTI and Brent remain in the $30s, a number of heavier crudes are already in the roaring twenties:

(Click to enlarge)

In other news, UN-led negotiations in Libya are stalling as an impasse remains in a country which has two rival governments, and two parliaments. Libya relies on oil to meet 96 percent of its income, but as militias control oil fields, pipelines, and export facilities across the country, the oil and gas industry is grinding to a halt. Rival groups initially set out to extort oil revenues from the central government, but as the country remains so inextricably divided, these groups are seem more intent on keeping oil revenues from each other. Related: How Far Will Oil Sink Before Christmas?

Finally, the WSJ ran a piece over the weekend which is near and dear to our hearts here at ClipperData. The headline is: ‘crude moves out to sea as inventories swell‘, and addresses something we’ve been pointing furiously to in recent months – that global inventories are brimming, and that this glut is being pushed out to sea.

After OPEC highlighted last week that OECD oil inventories are 244,000 barrels above their five-year average, the WSJ article points out onshore storage in Western Europe is at 97 percent of capacity, while Saldanha Bay in South Africa – one of the world’s largest oil storage hubs – is already full. All the while, U.S. inventories are at their highest level in more than 80 years. As the below graphic illustrates, stockpiles continue to ramp up:

By Matt Smith

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