• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 3 days "What’s In Store For Europe In 2023?" By the CIA (aka RFE/RL as a ruse to deceive readers)
  • 7 days America should go after China but it should be done in a wise way.
  • 22 hours Even Shell Agrees with Climate Change!
  • 3 days How Far Have We Really Gotten With Alternative Energy
  • 3 days The European Union is exceptional in its political divide. Examples are apparent in Hungary, Slovakia, Sweden, Netherlands, Belarus, Ireland, etc.
  • 3 days World could get rid of Putin and Russia but nobody is bold enough
  • 6 days Oil Stocks, Market Direction, Bitcoin, Minerals, Gold, Silver - Technical Trading <--- Chris Vermeulen & Gareth Soloway weigh in
Warren Buffett Regrets Owning Electric Utilities

Warren Buffett Regrets Owning Electric Utilities

Buffett recognizes that the US…

This Might Be The Fastest Way to Double U.S. Grid Capacity

This Might Be The Fastest Way to Double U.S. Grid Capacity

Upgrading existing lines using advanced…

Alex Kimani

Alex Kimani

Alex Kimani is a veteran finance writer, investor, engineer and researcher for Safehaven.com. 

More Info

Premium Content

Oil’s Wide Price Swings Have Ignored True Fundamentals

  • Oil markets have been extremely volatile over the last couple of weeks.
  • Large swings in macro sentiment have driven price movements.
  • StanChart says the key question for 2024 will be how much the targets for other OPEC.

The oil markets have been extremely volatile over the past couple of weeks, with wide price swings in either direction on no significant news and despite supportive fundamentals–right up until the OPEC+ meeting delay, where fear of cartel disorder trumped all, sending oil spiraling downwards.  But what was happening right up to that point was interesting. Front-month Brent settled at USD 80.37/bbl on 20 November after trading across a range of over $6/bbl from $76.60-82.90/bbl intra-week. Prices fell by $6/bbl intra-week and then rebounded by $6/bbl without any particularly significant flow of news. 

Up until Wednesday this week, when OPEC+ postponed its planned November 26 meeting until November 30 over output quota disagreements, the markets were being propelled primarily by large swings in macro-based sentiment, as well as changes in speculative positioning to the downside.

According to Standard Chartered, speculative positioning in crude oil moved further to the short side over the past week (prior to the OPEC meeting delay). Long positions across the four main Brent and WTI contracts fell 8.6 million barrels w/w to a five-month low of 447.7 mb, while short positions increased 11.2 mb to 220.7 mb. Money-manager long-short ratios followed a similar pattern, with the ratio for the Chicago Mercantile Exchange (CME) WTI contract falling below 1.9 in the latest positioning data, having been above 10 as recently as five weeks ago. StanChart’s proprietary money-manager crude oil positioning index fell 6.7 w/w to a four-month low of -73.3.

This choppy trading is likely to prevent a real dilemma for OPEC+ ministers when they finally meet on 30 November to discuss policy and oil market conditions moving into 2024. This will compound its internal dilemma over oil output quotes, which is now a battle between the OPEC giants and African nations Angola, Nigeria and Congo.  Related: Greek Shippers Halt Russian Crude Transports Amid U.S. Sanctions Push

At its last policy meeting in June, OPEC+ reached a  broad deal to limit supply into 2024 while Saudi Arabia has since extended its voluntary production cut of 1 million bpd until the end of 2023. According to StanChart, the  main agenda for OPEC+ over the next few meetings, when considering policy for the next quarter and beyond, will be about rebalancing the weight of market adjustment. OPEC pumped 27.90 mb/d of crude in October, a y/y fall of 1.66 mb/d; Iranian output climbed 558 kb/d, Libyan output fell 23 kb/d while Venezuelan output climbed 70 kb/d higher. Overall, the  y/y fall for the 10 OPEC members with OPEC+ production targets totaled 2.26 mb/d.

As expected, Saudi Arabia has borne the lion’s share of the cuts, with its output lower by1.87 mb/d y/y; good for 83% of the output fall for OPEC members with targets.

StanChart says the key question for 2024 will be how much the targets for other OPEC

members will be reduced after Saudi Arabia’s voluntary cuts are unwound. StanChart has argued that the other OPEC members with targets might not lower their current targets at all since oil prices are well-supported by strong fundamentals and strong sentiment (not accounting for the blip in prices due to the meeting’s delay, which happened after Standard Chartered released its report). 

The bank has forecast an average 2024 call on OPEC crude oil of 29.3 mb/d, 1.4 mb/d higher than October 2023 output, arguing that this will leave scope for voluntary cuts to be phased out quickly. Call on OPEC is a term that refers to an estimate of the crude oil production volume required of OPEC countries to balance the global supply and demand for crude oil.

StanChart’s estimate is pretty close to the OPEC Secretariat’s which has predicted and even

higher forecast call on OPEC of 29.9 mb/d, or 2 mb/d above current output. The IEA puts the 2024 call on OPEC at 28.4 mb/d while the  EIA has forecast it will clock in at

27.7 mb/d. 

StanChart has predicted that OPEC is likely to defer consideration of the largest part of the

rebalancing question into 2024 due to the mixed signals the oil markets have been sending lately.

Extreme Demand Pessimism Could Trigger Rally


Last week, StanChart predicted that the ongoing extreme demand pessimism in the oil market could prove to be unfounded and trigger a big oil price rally similar to the undershoot in prices that laid the ground for the May rally that extended to over USD 25/bbl. 

Notably, India’s oil demand remains strong, increasing by 211 kb/d in October to 5.004 million barrels per day (mb/d). Diesel demand has been particularly robust, rising 9.3% y/y to 1.88 mb/d, while gasoline demand was up 4.8% y/y to 861kb/d. StanChart’s proprietary demand model has forecast global oil demand growth will stay above 1.5 mb/d in November, December and January, while 2024 growth is likely to clock in at 1.5 mb/d. 

By Alex Kimani for Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment
  • Ian St. John on November 25 2023 said:
    Something missing is the fact that the high prices OPEC have forced on the world have stimulated more supply, so they are losing the dominance to control pricing in the face of US supplies, the resurgence of Venezuela after US sanctions cut and other African nations joining the club.

    The real worry for me is that with Venezuela rebuilding it's output and the possibility that the US will switch back from Canadian supplies to more easily transported Venezuelan heavy oil, the AB oil industry may be in for a hit.

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News