Offshore drilling platform by night In sticking with our recent $42-$50 forecast for WTI we underestimated the ability of OPEC + Russia to talk the market up while behaving bearishly. Although recent production data for Libya, Nigeria, core OPEC and Russia has exceeded expectations by a significant margin the most powerful force in markets over the last two weeks has been a 154k contract increase (+34%) in speculative net length in ICE Brent and NYMEX WTI contracts as funds grew unwilling to hold short positions as long as rival OPEC members and Putin were publicly singing Kum ba yah. In our judgment the market is not fully pricing in meaningful shared supply cuts (and we don’t think it should be) but merely repositioning itself for the unlikely event that they occur. More importantly, the bullish OPEC headlines are adding fuel to the rebalance narrative which we continue to see […]