In this report: Deep C.O.T analysis on Brent & WTI. Market narratives narrow. OPEC next actions.
Views
Oil remains titled to oversupply. Middle East tensions continue to cast a long shadow over seaborne flows, with Iran-Israel brinkmanship and persistent Houthi threats to Red Sea shipping routes keeping tanker risk premia elevated. Meanwhile, U.S. shale-the market’s old swing producer-has gone quiet, with capital discipline, rapid well declines, and flat rig counts stalling any meaningful growth. On the flip side, upside supply risk still lingers: a thaw in U.S.-Iran relations could see up to 1.7M bpd flood back into the market, while OPEC’s spare capacity-namely from Saudi and the UAE-could quickly be tapped if quota discipline gives way to fiscal reality.
OPEC production increases are supposedly because they are teaching Kazakhstan a lesson for over producing. The real game, as I wrote about April 3rd, is that they are conducting a smart market share war with The U.S. This is a view that has grown amongst analysts over the last 6 weeks. I’m going to share here the chart I shared almost 2 months ago. I personally don’t think OPEC has a price target in mind for when they will stop increasing production, but this chart helps in understanding the breath of this strategy.
Meanwhile, over at the IEA, Finding Nemo, IEA discovers its ‘missing barrels’. Someone in the quant department is getting fired. After 2 years of a quite public spat between OPEC and IEA, IEA finally admit to getting the data wrong.
Demand revision that cumulatively represents a change of 343 million barrels. That is close to three-and-a-half days of global oil demand. Every episode related to this has ended up with the IEA revising upward its demand figures- Haitham Al Ghais, OPEC Secretary General
Articles
Finding Nemo, IEA discovers its ‘missing barrels’
New intelligence suggests Israel is preparing a possible strike on Iranian nuclear facilities, US officials say
Iranian civil society sends letter to UN chief, warns against US potential attack
OPEC+ discusses making another large output hike in July, Bloomberg News reports
Commitment of Traders analysis
Going forward, I will be posting C.O.T analysis for Brent and WTI in each report for paid subscribers. This is a meaningful value add-on to this report for professional market participants. We have invested in the development of in-house tools in Duggan Capital to enhance risk management across the energy curve. Insights from this tool will be shared here below. Each week, I aim to extract signal over noise.
