- Money managers add to U.S. crude position, cut Brent
- Market expects extended production cuts, though doubts loom
- U.S. rig count unchanged at 738 in week to Nov. 17
Oil eased on Monday, as traders were wary of betting too heavily on which way prices might move ahead of an OPEC meeting next week, when the exporter group is expected to decide whether to continue output cuts aimed at propping up prices.
Brent crude futures were at $62.25 per barrel by 1210 GMT, down 47 cents, while U.S. West Texas Intermediate (WTI) crude futures eased 10 cents to $56.45 a barrel.
The Organization of the Petroleum Exporting Countries (OPEC), together with a group of non-OPEC producers led by Russia, has been restraining output since the start of this year in a bid to lower global inventories and support prices.
The deal to curb output is due to expire in March 2018, and OPEC meets on Nov. 30 to discuss the outlook for the policy. The expectation is for the agreement to be extended to cover the whole of next year.
“It is widely believed that OPEC together with 10 non-OPEC countries will roll-over their production for the whole of 2018 although Russia is holding its cards close to its chest,” PVM Oil Associates strategist Tamas Varga said.
OPEC last week forecast demand for its own crude to rise by 460,000 bpd to 33.42 million bpd next year, in contrast with a forecast from the International Energy Agency for a drop of 320,000 bpd to 32.38 million bpd.
“Such a rollover (in the deal) would be bullish if you believe OPEC’s numbers but will not reduce global or OECD stocks if the IEA estimate is closer to reality. Judging by the weekly losses more credit was given to the IEA prediction,” Varga added.
Reflecting some of the uncertainty brewing over the possible outcome of the meeting, money managers in the Brent market trimmed their net long position for the first time in a month, by just over 5,000 lots to 537,557.
They also added 4,793 lots in short positions – more than at any time since late June.
But the net long position is still well within sight of the previous week’s record high of 543,069 lots, meaning that if OPEC’s decision disappoints the more bullish investors, the chances of a sell-off after the meeting are higher.
“Prices are likely to correct after the OPEC meeting due to profit-taking by speculative investors,” Commerzbank analysts said in a note.