Bloomberg with the report that the world’s two biggest commodities indexes — the S&P GSCI Index and the Bloomberg Commodities Index — are due to ‘reset’, which will trigger selling of futures contracts.
S&P GSCI Index and the Bloomberg Commodities Index reset
For WTI, that means investments tracking both benchmarks could be ready to pull almost 60 million barrels worth of futures contracts from the market, according to Societe Generale estimates.
The dollar value of those flows is significant — the French bank estimated in November it would be the equivalent of about $4.6 billion. Citigroup Inc. expects about $3.1 billion of selling, according to a December report.
Something to keep top of mind is that these flows are widely known and it would be bizarre if some, if not all, has been hedged into prices already. the Citi note, for example, was published in December.
Just ahead of the report, WTI crude was trading down about $1 to $69.64 but these are some bullish numbers across the board and it’s back just above $70. Oil levels in the US SPR are at the lowest since 2002 and will continue to decline due to the recently-announce release. However that will turn into buying in the summer.
“Our oil price assumption (based on the forward curve) is roughly 15% lower for 2022 than in last month’s report,”
“Brent prices average $70.80/bbl in 2021 and $67.60/bbl in 2022.”
In brief the report highlighted:
Global oil demand expected to rise by 5.4 million barrels per day in 2021 and 3.3 million barrels per day in 2022 to hit pre-pandemic levels of 99.5 million barrels per day globally.
that’s a revision down its outlook by 100,000 barrels per day for both the remainder of this year and 2022.
The rise in new Covid cases was expected to slow demand,but not completely derail it.
Production is poised to outpace demand from December,
upward trend would extend into 2022, the IEA citing the U.S., Canada and Brazil set to pump at their highest annual levels ever
“Saudi Arabia and Russia could also hit records if remaining OPEC+ cuts are fully unwound,” the IEA said. “In that case, global supply would soar by 6.4 mb/d next year compared with a 1.5 mb/d rise in 2021.”
Bloomberg (may be gated) carried the report overnight:
“We’re heading toward a phase that could be dangerous if there’s not enough spending on energy”
result could be an “energy crisis”
daily oil output may fall by 30 million barrels by 2030
“We have very serious concerns that the world could run short of energy if we are not careful in managing the transition,”
“In Saudi Arabia, we have an interest in maintaining demand. We are also worried that demand is increasing and there are no alternatives to fill that gap and we don’t want oil prices to go too high.”
