Quarterly Outlook
Macro Outlook: The US rate cut cycle has begun
Peter Garnry
Chief Investment Strategist
The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
Short sellers regain control as crude oil prices plummet
Ole Hansen
Head of Commodity Strategy
Summary: Crude oil prices continue lower after tumbling 5% on Tuesday amid fresh technical momentum selling following Monday’s failed attempt to reach safer grounds above $80.50 in Brent and $76.50 in WTI. In the process prices have slumped back to levels last seen during the March banking crisis. Despite OPEC’s best efforts to confront emerging signs of a slower than expected demand outlook for the second half, and to ensure a stable high price for its crude oil, negative price developments since April 2 production cut has rendered these efforts fruitless with short sellers firmly back in control
Today's Saxo Market Call podcast
Global Market Quick Take: Europe
Crude oil prices continue lower after tumbling 5% on Tuesday amid fresh technical momentum selling following Monday’s failed attempt to reach safer grounds above $80.50 in Brent and $76.50 in WTI. In the process prices have slumped back to levels last seen during the March banking crisis which helped trigger the OPEC+ production cut on April 2. However, following a brief spike in response to the cut, the market has since then been on the defensive with technical and macro-economic developments once again favouring those holding short positions.
Despite OPEC’s best efforts to confront emerging signs of a slower than expected demand outlook for the second half, and to ensure a stable high price for its crude oil, negative price developments since April 2 has rendered these efforts fruitless. Not only has Russia’s ability to export its crude and fuel products exceeded most expectations, in addition we are seeing a less commodity intensive recovery in China than during earlier government supported growth sprint. Combining these developments with continued weakness in economic data, especially in the US, and the ongoing crisis among US regional banks, the demand outlook for the second half continues to be downgraded, thereby forcing price downgrades, most recently from Morgan Stanley who have cut their end of year Brent crude oil price by 12.5 dollars to $75 a barrel.
For now, the market will continue to worry about the risk of recession and its impact on demand, a concern that during the past month has been on clear display through a dramatic slump in refinery margins across the major regions, first for diesel and more recently also for gasoline. Diesel which powers heavy machinery such as truck and construction equipment are often seen as the canary in the coalmine and if continued it may lead to lower refinery demand and with that lower demand for crude oil.
Ahead of tonight’s FOMC meeting, previewed in our daily Market Quick Take and discussed in our daily Saxo Market Call podcast, the weekly crude oil and fuel stock report from the EIA is unlikely to attract much attention. The American Petroleum Institute last night reported a 3.9 million barrel draw in US crude stocks, and 1 million barrels in distillates while gasoline stocks increased by 0.4m barrel. Apart from these data the EIA will as per usual also shed some light on production, exports as well as the implied demand for gasoline and diesel.
Managed money activity in the week to April 25
The April 2 OPEC+ production cut continued to reverberate across the crude oil market, in the most recent reporting week to April 25 through the negative impact of short sellers chasing the gaps and longs that was bought after April 3 being reduced. The combined net long in WTI and Brent crude oil was cut by 54.3k lots to 400k, a four-week low, with reduction being driven by 32.5k lots of long liquidation and 21.8k lots of fresh shorts.
A major driver of the recent crude oil market weakness has been a slump in refinery margins across the major refinery hubs in Asia, the US as well as Europe. Especially the diesel market saw accelerated selling during the reporting week, resulting in the ICE gasoil net flipping to a small net short for only the third time in seven years. Stateside meanwhile, the net long in the ULSD contract (Ultra-Light Sulphur Diesel), previously known as heating oil, was cut by 44% to a 27-month low.
Technical outlook for WTI
WTI crude oil’s failure on Monday to climb back above and onto safer grounds above $76.50 sent a signal of weakness, which short sellers are now exploiting at a time where a weakening macroeconomic backdrop is supplying some added tailwind. Further weakness, however, may raise speculation about more action from OPEC, and whether the US government will start to buy back crude oil for its strategic reserves.Having broken below $71.53, the 61.8% retracement of the March to April rally, the short-term risk of an extension to the sub-65 low cannot be ruled out.
Latest Market Insights
Quarterly Outlook 2024 Q4
-
-
Quarterly Outlook
Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges
Althea Spinozzi
Head of Fixed Income Strategy
-
Quarterly Outlook
Equity Outlook: Will lower rates lift all boats in equities?
Peter Garnry
Chief Investment Strategist
After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto... -
Quarterly Outlook
FX Outlook: USD in limbo amid political and policy jitters
Charu Chanana
Head of FX Strategy
As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ... -
Quarterly Outlook
Commodity Outlook: Gold and silver continue to shine bright
Ole Hansen
Head of Commodity Strategy
-
Quarterly Outlook
FX: Risk-on currencies to surge against havens
Charu Chanana
Head of FX Strategy
Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo... -
Quarterly Outlook
Equities: Are we blowing bubbles again
Peter Garnry
Chief Investment Strategist
Explore key trends and opportunities in European equities and electrification theme as market dynami... -
Quarterly Outlook
Macro: Sandcastle economics
Peter Garnry
Chief Investment Strategist
Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p... -
Quarterly Outlook
Bonds: What to do until inflation stabilises
Althea Spinozzi
Head of Fixed Income Strategy
Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ... -
Quarterly Outlook
Commodities: Energy and grains in focus as metals pause
Ole Hansen
Head of Commodity Strategy
Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
Disclaimer