Hedge Funds Pretty Flat on Oil
Money managers seem to be staying clear of any new significant purchases of oil, or perhaps they have all taken a synchronised holiday, as purchases dropped to and equivalent 24 million bbls of futures and options, up slightly from 21 million the previous week, but still not really making any significant movements. The current net long position across all six major oil contracts (642 million barrels) is exactly in line with the mean over the last seven years (641 million). Last week’s purchases were concentrated in Brent (+11 million barrels) and European gasoil (+7 million) with smaller buying in NYMEX and ICE WTI (+1 million), U.S. gasoline (+5 million) and U.S. diesel (+1 million) according to Reuters.
All Fuel Oil Roads Lead to Saudi Arabia
In an unusual flow of the product, over 500,000mt of high sulphur fuel oil (HSFO) is expected to be moved from Singapore to the Middle East to fuel power stations and desalination plants in Saudi Arabia. Low freight rates have helped make this flow viable, with the backhaul discount making the twice as long Singapore to Red Sea route the same lump sum as that of the Persian Gulf to the Red Sea voyage.
Chevron Buys Noble for $5 Billion
After the oil price collapse shrank the value of shares earlier in the year, this has made them prime targets for any companies who have managed to robustly survive the downturn. The purchase of Noble by Chevron for $5 billion is the first big energy deal since WTI prices plunged to negative levels.
China Boosting Fuel Exports to Rid Glut
After record oil imports into the country, China is now seeking to increase its exports of refined gasoil and gasoline to help clear its every growing product stockpiles. Chinese refineries have maintained their high throughput despite dwindling domestic demand, with levels reaching 14.14 million bpd in June, or a 9% rise year on year. There is an opening in the market though as South Korea drops its fuel exports, with other Asian countries also still lingering on lower refinery production than pre-pandemic, there is a widening gap in the market for the extra Chinese product to flow into.