In an oil and gas report sent to Rigzone by the Macquarie team late Wednesday, Macquarie strategists said it appears to them that the oil market “is reviewing 2025 balances and becoming incrementally less bearish”.
“The modest builds in 4Q24 are helping sentiment because the mid-year consensus view that 4Q24 builds would be relatively large, has not realized,” the strategists highlighted in the report.
“Additionally, lower U.S. supply growth expectations (yet again) are helping 2025 narratives,” they added.
The strategists noted in the report that these factors have not sustained rallies because consensus 2025 balances remain in surplus.
“Our 2025 balances don’t have large U.S. supply growth or OPEC+ returning, and Trump 2.0 is neutral,” they said in the report.
“In our view, if prices don’t break below $70 by 2Q25, the bear thesis will need to be revisited,” they added.
The strategists said in the report that $70 Brent seems to be a fundamental and technical support.
“Few participants we have spoken with are comfortable shorting at Brent $70,” the strategists noted in the report.
The Macquarie strategists highlighted in the report that, last week, Brent increased by around $3 per barrel “on tighter Russian sanctions risk, the fall of the Assad regime in Syria, Chinese stimulus efforts, and a potential short squeeze in the physical market”.
“However, the uncertainty on the impact and duration of the drivers listed above limited the upside, especially given the heavy balances anticipated for 2025,” they pointed out.
“In contrast to upward price action, Managed Money length fell with WTI and Brent down a combined 11K after increasing 28K the prior week,” they added.
“Crude continues to face resistance at $75 per barrel, roughly the 100D MA. Fundamental resistance is likely due to the fact even with the recently tighter market, 2025 is likely headed for surplus balances,” the strategists went on to state.
In a research note sent to Rigzone by the JPM Commodities Research team late Monday, analysts at J.P. Morgan said “the estimated value of open interest across energy markets increased by $22 billion (+four percent week on week)”.
“The increase was predominantly driven by crude oil and petroleum products which experienced healthy inflows of $7 billion during the week across all trader types,” they added.
“This was further supported by strong price action across WTI and Brent crude oil markets which rallied by six percent and five percent, respectively, through the week,” they continued.
“Our oil strategists highlight continued robust global oil demand, increasing by 1.3 million barrels per day year to date,” they went on to state.
In a separate research note sent to Rigzone on December 11, analysts at J.P. Morgan said global oil demand averaged 103.5 million barrels per day during the first 10 days of December. In that note, the analysts outlined that the figure marked a 2.1 million barrel per day year on year increase but was 400,000 barrels per day below their expectations.
In a Stratas Advisors report sent to Rigzone by the Stratas team on the same day, the company outlined that, this week, it expects oil prices “will move sideways with more downside risk than upside potential”.
“It is difficult to find a factor that will give a boost to oil prices,” the company added.
In the report, Stratas outlined that, at the beginning of last week, it didn’t think Brent crude would break above $73 per barrel.
It pointed out, however, that “oil prices got support in the latter half” of last week, “in part, from another draw on U.S. crude inventories, indications that China will be implementing additional fiscal and monetary stimulus, coupled with reports the Biden administration is considering imposing additional sanction on Russian oil exports”.
Source: by Andreas Exarheas for Rigzone Staff