As Saudi Arabia is determined to end the oil glut around the world, the snorting, red eyed bull continues its charge towards price levels that haven’t been seen in over 6 months. As of 12:45pm EST, WTI for December delivery is up almost 1% at $52.40. November HO is up $0.0146 at $1.8024 and RBOB is up $0.0246 at $1.7029. The Saudis continue to prod the bull and reiterate the “do anything” mentality to get oil inventories back to the 5-year average. Saudi Energy Minister Khalid al-Falih said to Reuters, “We have reduced the inventories by over 180 million barrels and we still have about 160 million barrels according to numbers I have seen last.” The focus remains on reducing the level of oil stocks in OECD industrialized countries to their five-year average he said. With continued geopolitical tension between Iraq paramilitaries and the Kurds, Southeast Asia oil demand growing until at least 2040, and U.S. crude inventories expected to have fallen for a 5th week in a row, the channel-top of $53.87 continues to be within reach.
A settlement today above $52.97 should yield the $53.87 and then $54.90 formation by the end of this week. However, the managed money net long has more than doubled in four months with the price rising about 25% in WTI and 30% in Brent crude. That puts net long holdings equal to 16% of total open interest. The average was 9% in the past five years.
For now we shall wait and see how many times the “Matadors of the Oil Kingdom” can prod the bull before it turns around and shapeshifts into a growling, swatting bear. Until then, we await tonight’s API and tomorrow’s DOEs for a clearer picture into the delicate rebalancing of our global oil inventories.