Brent crude futures fall on refinery turnarounds, warm weather

London (Platts)--23Oct2006

ICE Brent futures plunged over a dollar on Monday morning to the lowest
levels seen since October 12 as the crude complex shrugged off news of
confirmed cuts in crude sales by OPEC lynchpin Saudi Arabia to focus on
refinery maintenance in the US and warm weather in the US and Europe.
Saudi Arabia announced that it would remove 1.2 million b/d from crude
sales in November primarily to the far east. However, one broker suggested
that this cut has not had the required clout to elbow crude higher as it has
long been expected and factored in. He added that skepticism remains over the
extent that other OPEC members will follow suit.
At 1100 London time (1000GMT) Brent crude for delivery in December was
trading at $58.77/barrel, down 91 cents having fallen over a dollar this
morning to an intra-day low of $58.62/barrel. ICE WTI December was down a
similar amount trading 81 cents lower from Friday's settle.
"The spreads are looking very weak at the moment particularly the
December/January spread," said one broker. "The market is looking at other
factors depressing the market like ongoing refinery turnarounds in the US
which means less crude being taken off the market and the mild weather which
is a concern on both sides of the Atlantic."
Olivier Jakob of risk management company Petromatrix, said in a report
that despite OPEC production cuts, the market remains in a tight $57-60/barrel
range with more gravity towards the downside. "It [the market] will still
speculate on the real size of oil that will be taken away, but at least OPEC
[and Saudi Arabia] has demonstrated that they will not encourage low prices
and that if higher cuts are required they would also do that."

CFTC DATA SHOWS COMMERCIALS ADDING TO SHORT POSITIONS
On Friday, the Commodity Futures Trading Commission released bearish data
regarding positions in crude futures and options markets, said one
London-based broker.
Commercials, which are comprised of oil companies, refiners and banks,
added to a short position as prices briefly popped above $60/barrel.
Commercials were short 25,797 contracts of crude options and were essentially
flat in the futures market.
Non-commercials were still long 39,928 contracts of crude futures and
options, but short 2,696 lots in the futures market. Non-commercials were
short both the WTI financially-settled contract and the e-miNY. Therefore,
when combining the three crude contracts on NYMEX, non-commercials were long
31,233 contracts of crude futures and options.
Non-commercials left positions essentially unchanged in the RBOB market
as well, leaving them long 6,377 contracts of futures and options.
Non-commercials bought back shorts in the heating oil futures and options
market, leaving them short 7,463 lots.
--Jonathan Davies, jonathan_davies@platts.com

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