Oil prices on the defensive – Rabobank

Last week produced declines in oil, equities and gold while the VIX and the USD rallied. Floating storage levels remain quite elevated and many of those barrels will be delivered into Asia in the 4th quarter adding to near-term oversupply concerns. Furthermore, Iraq is reportedly seeking a two-month extension to make up for the additional OPEC+ supply cuts it agreed to weeks ago, a rather telling development, per Rabobank.

Key quotes

“We continue to see oversupply risks developing in Asia in the 4th quarter as floating storage trades are unwound and crude is delivered onshore. The timing of this large wave of crude deliveries into Asia also coincides with the timing for a potential second wave of outbreaks which if it were to occur would be very detrimental to global crude oil demand.”

“We continue to focus on macro factors influencing oil prices as they remain crucial drivers. Further to that point, the sharp decline in equities this week and strength in the US dollar is notable and the potential for further corrections in risk assets is certainly feasible.” 

“As for oil fundamentals, the fact that Iraq is reportedly seeking a two-month extension to make up for the additional OPEC+ supply cuts is a rather telling development to our minds. As such, we see cracks forming in the tight supply narrative and even view Libya as an imminent upside supply risk as that struggling OPEC producer seeks to resume oil exports in the near future.”