Oil: Long Brent on outsized cheapening post-US NFP, Saudi Aramco output cuts (others to follow)

Oil: Long Brent on outsized cheapening post-US NFP, Saudi Aramco output cuts (others to follow)

Adding to our tactical short USD view this week, we add a long Brent oil position. Brent oil price has not yet recovered after an outsized sell-off last Friday post-US NFP-driven Dollar strength.

News overnight (Bloomberg, 9 Oct-17) about Saudi Aramco's supply cuts is not only a bullish headline (cuts above and beyond add credibility to OPEC output accord) but - importantly - it has the potential to coax other producers to signal similar output cuts before the annual meeting in Vienna (30 Nov).

Details:

  • Saudi Aramco to cut 560k bpd in customer allocation from Nov to supply 7.15mbpd (v 7.7mbpd demand), expects others to follow

  • Saudi Aramco supply cuts for Nov = full 290k bpd reduction over/above 486k bpd that it pledged as part of OPEC accord (total 800k)

We watch two key monthly events tomorrow (Wed, 11 Oct) for positive news on demand outlook:

  • EIA releases monthly short-term energy outlook (STEO, link)

  • OPEC monthly market report (link)

  • Calgary Energy Roundtable

Entry: 55.80

Target: >56.87 (14dma)

Stop: <55.1 (9 Oct-17 low)

Time horizon: 1-2wks

Visual: Brent oil (-1mth)

Visual: Brent oil (-6mth)

#oil #saudi