Oil prices continue to edge higher. NYMEX WTI broke above US$80/bbl on Friday for the first time since November 2014. ICE Brent is comfortably trading above US$80/bbl, although still below the levels seen in 2018. This strength has continued in early morning trading today. Power concerns continue to offer support to the oil market. This is a trend we are likely to see continue through the winter. China is taking steps to try alleviate the tightness in the domestic coal market, by pushing local mines to increase output. However, heavy rains in Shanxi province over the last week has led to some mines having to temporarily shut in the region.
In Europe, natural gas prices have come off their highs last week, following comments from the Russian president last week, that Russia would be willing to stabilise gas markets. However, prices levels still remain elevated. TTF is trading just shy of EUR88/MWh, which is an oil equivalent of around US$170/bbl. The latest data from GIE shows that gas storage in Europe is a little over 76% full at the moment, compared to a 5-year average of almost 91%.
Given the move higher in the oil market in recent weeks, it is no surprise to see that speculators have increased their net longs in both ICE Brent and NYMEX WTI. The managed money net long position in WTI increased by 18,115 lots over the last reporting week to 316,157 lots as of last Tuesday, the largest position since the end of July. Although, clearly speculators still have some room to push the market, when you consider that they were holding a net long of around 426k lots back in June. The move in Brent was more modest. Speculators increased their net long by just 3,723 lots over the reporting week, to leave them with a net long of 332,677 lots as of last Tuesday.
Finally, on the agenda for this week, OPEC will be releasing its monthly oil market report on Wednesday, which will be followed by the IEA’s monthly oil report on Thursday. There will be interest from the market on what demand revisions will be made, given expectations of a demand boost due to gas to oil switching.