Oil bulls brace for repeat of Opec’s bearish blow

A year ago, the Saudis led group in maintaining output, exacerbating a global glut

Hedge funds are betting this week’s Opec meeting will deliver another bearish blow to crude.

A year ago, Saudi Arabia led the Organisation of Petroleum Exporting Countries in keeping production quotas steady, exacerbating a global glut and sending prices tumbling. Analysts surveyed by Bloomberg expect a repeat this year when the group meets on December 4 in Vienna. Iran has said it will announce plans during the meeting to expand its output.

“Without the Saudis nothing is going to happen and it’s pretty clear they aren’t about to cut,” said Mike Wittner, head of oil-market research in New York at Societe Generale SA. “It’s hard to even come up with scenario where there would be an agreement for a cut.”

Money managers’ net-long position in West Texas Intermediate crude fell 20 per cent in the week ended November 24, the biggest drop since July, data from the US Commodity Futures Trading Commission show.

WTI has declined 39 per cent in the past year and was trading at $42.15 a barrel as of 9.41am. London time. Futures advanced 5.4 per cent during the report week to $42.87.

Opec’s decision to keep the spigot open has compounded a worldwide surplus of crude.

The 12-member organisation pumped 32.121 million barrels a day in November, the 18th straight month above its target of 30 million, according to a Bloomberg survey of oil companies, producers and analysts. US stockpiles stand at more than 488 million barrels, the highest for this time of year since 1930.

The group’s effort to defend its market share is slowly paying off. Shale drillers have idled rigs and cut spending by $40 billion in the first nine months of this year, according to data compiled by Bloomberg on 61 independent US producers.

The country’s production has remained flat in 2015 after three consecutive years of adding 1 million barrels a day.

“US production is coming down, but at a very slow rate, which is bearish,” Wittner said.

“The market is very much in wait-and-see mode right now. There’s no expectation for Opec to take any action this week.”

Speculators’ net-long position in WTI fell by 24,311 contracts to 96,521 futures and options combined, the lowest since August, CFTC data show. Shorts increased by 6.4 per cent to 164,102, the most since March. Longs declined by 5.2 per cent to 260,623.