Oil Steadies as Saudi Plans to Reduce Supply to Asia

Saudi Aramco is planning to reduce its supply of Arab heavy crude to term customers in Asia starting in April due to oilfield maintenance, ING commodities strategists said in a Monday note.

Analysts said the quantity and duration of the maintenance are still unclear, while the producer will maintain its April loading for other crude grades. Earlier, the producer unexpectedly increased prices for heavier grades in April for Asian buyers.

Brent crude traded at US$82.32 per barrel and West Texas Intermediate crude was at US$78.16 per barrel early on Monday.

Oil tankers continue to take alternative routes to avoid conflict in the Red Sea, increasing shipping costs. The delay in shipments is creating a regional arbitrage for both crude oil and oil products, ANZ noted.

Weekly data from Baker Hughes shows that the US oil rigs rose by two rigs over the last week, with the total oil rig count increasing to 504 for the week ending 8 March 2024.

Meanwhile, gas rigs fell by 4, taking the total rig count (oil and gas combined) to 622 over the reporting week. The extended weakness in gas prices appears to weigh on gas rigs, with some exploration companies reducing investments in natural gas production.

The latest positioning data from CFTC shows that speculators increased their net long position in NYMEX WTI by 9,230 lots for a fourth consecutive week, leaving them with net longs of 183,960 lots as of 5 March 2024, the highest bullish bets since the week ending 24 October 2023.

Rising concerns over the tightening physical market, OPEC+ extending supply cuts and persisting uncertainty in the Middle East continue to support the uptrend in speculative bets.

In contrast, money managers extended the decline in their net longs in ICE Brent by 17,976 lots for a third straight week over the last week, leaving them with a net long position of 236,805 lots as of last Tuesday.

This was the least bullish bet since the week ending on 23 January 2024. The move was dominated by falling gross long positions, which decreased by 18,044 lots to 312,562 lots over the reporting week.

The market now awaits the release of the OPEC and EIA updates scheduled later this week to get more clarity on the demand outlook. OPEC will release its monthly oil market report, which will include monthly production numbers for the group along with its latest outlook for the oil market.

The report will likely continue to show expectations that the market will tighten for the remainder of the year. The EIA will also release its Short-Term Energy Outlook, which will include its latest US oil production estimates. #Oil Steadies as Saudi Plans to Reduce Supply to Asia

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