Best in Energy – 7 July 2022

EU parliament adds gas and nuclear to green energy list

France to renationalise nuclear power generator EdF

Aramco raises official selling prices as oil futures fall

Oil price falls not yet justified by recession risk ($BBG)

China tax reductions hit $385 billion in Jan-June (trans.)

China plans to boost car sales after lockdown hit ($BBG)

United States intensifies sanctions enforcement on Iran

PRIOR to this week’s sharp drop in oil prices, hedge fund positioning was not showing the congestion that often signals an imminent reversal in the price trend:

HEDGE FUND positions in crude were below average in both Brent and WTI (36-37th percentile). The ratio of long to short positions showed a bullish bias but not excessively so (65-66th percentile):

HEDGE FUND managers showed no sign of preparing for a sharp fall in oil prices – with the number of short positions close to multi-year lows:

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Best in Energy – 6 July 2022

India limits gasoline and diesel exports

China issues new fuel export quotas

EU relaxes oil sanctions on Venezuela

Global LNG: trade report and statistics

U.S. recession indicators mixed ($WSJ)

Qatar is big winner from gas war ($FT)

BRENT’s front-month futures price fell -$10.73 (-9.5%) on July 5. The decline came on a day with little new information about production or consumption but traders seemed to anticipate a higher probability of an economic slowdown. In percentage terms, the decline was the third-largest since July 2020 and 4.1 standard deviations away from average since 1990:

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Best in Energy – 18 March 2022

[MUST READ] Russia’s military failure ($WSJ)

IEA plan to restrain oil use by 2.7 million b/d

EU plan to replace Russian gas lacks realism

Oil market liquidity falls as volatility rises

Traders hit by rising margin calls ($BBG)

Russia’s oil exporters switch to private sales

IEA/EIA/OPEC divide on war impact ($BBG)

China holds epidemic policy meeting (trans.)*

U.S. shale smaller firms boost output ($WSJ)

Andurand’s path for oil to reach $200 ($BBG)

* The fact China’s top policymaking group held a meeting dedicated to coronavirus control and its impact on daily life and the economy, and chose to publicise it as the top item on all state-controlled websites, suggests the country’s leaders are deeply concerned about the extent and impact of the latest outbreaks.

BRENT’s six-month calendar spread has become highly volatile as traders try to assess whether or not sanctions will disrupt Russia’s exports and how much impact that will have on global oil supplies. In recent weeks, the spread in dollars per barrel has seen 5-10 standard deviation movements on multiple days, which is generating large P&L swings and margin calls:

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