Crude Oil News Today: Risk Premium Creeps Back on Russia Refinery Hits

In this report: Russia under continued counteroffensive on its refineries, OPEC Monthly report highlights, EV demand dampens, Commitment Of Traders analysis and trade.

‘Near the Georgian border there is a spring from which gushes a stream of oil in such abundance that a hundred ships may load there at once. This oil is not good to eat; but it is good for burning and as a salve for men and camels affected with itch or scab’’- Marco Polo Circa 1271

Views

In 1846, the first commercially drilled oil well in history commenced drilling in Bibi-Heybat, Baku, Russia (Now Azerbaijan). Edwin Drakes well in Titusville, Pennsylvania, USA was not to spud in (start drilling) for another 14 years. Read more on The Great Baku Oil Rush.

An old well in Baku still stands as a monument to the great energy transformation, one small step for power. Fast-forward to today, and there is new chapter in the pages of history. The giant leap of compute power for mankind. This will be powered by electricity, stemming from oil, natural gas and a host of renewables. But underpinning all of this, the fight for energy dominance, control and security remains the same old game. A.I models currently require new heights of power generation, and with this requirement, the focus on power creation and control has never been so important.

Source: S&P Global

Over the last 6 months, Russian oil infrastructure, mainly refineries, have continued to come under attack from Ukrainian drones. A smart strategic set of targets for Ukraine’s counteroffensive. The oil market focus will now shift away from OPEC+, back to geopolitical risks in The Heartland

Articles

• Ukraine hits one of Russia’s largest oil refining complexes with explosive drone attack
• OPEC Monthly oil report- September
• Trump ready for ‘major’ Russian sanctions if NATO stops buying Moscow’s oil
• Podcast- US Shale oil price sensitivities. Breakdown the metrics

Notes from OPEC report.

• Hedge funds and other money managers turned increasingly bearish on crude oil futures in August, with combined NYMEX and ICE WTI contracts moving net short during the last three weeks of the month
• World Oil Demand

The global oil demand growth forecast for 2025 remains at about 1.3 mb/d, y-o-y, unchanged from last month’s assessment. In the OECD, oil demand is forecast to grow by about 0.1 mb/d in 2025, while oil demand in the non-OECD is forecast to grow by about 1.2 mb/d. In 2026, global oil demand is forecast to grow by about 1.4 mb/d, y-o-y, also unchanged from last month’s assessment. The OECD is projected to grow by about 0.2 mb/d, y-o-y, while the non-OECD is expected to expand by about 1.2 mb/d, y-o-y

• ‘‘Crude oil futures dropped on average m-o-m in August, weighed by heavy selloffs from non-commercial participants in the oil futures markets. The decline was exacerbated by market sentiment that remained largely driven by expectations of a potential easing of geopolitical risks in Eastern Europe, alongside uncertainty over US trade policy and the broader economic outlook. The bearish shift in speculative activity amplified downward price movements, as money managers heavily cut their bullish exposure, flipping to net shorts on the WTI futures contract. However, prices rebounded in the second half of August, partially offsetting earlier losses. Renewed concerns about the geopolitical outlook in Eastern Europe curbed expectations of a swift resolution to the conflict, prompting some risk premiums to return. Support also came from the physical market, where sustained demand lent strength, while EIA data showed a large draw in US crude stocks, which fell to a two-month low in the week ending 22 August.’’
  

E.V demand outlook

Commitment Of Traders – WTI

Open Interest decreased 30,746 contracts WoW from an increase of 758,301 contracts last week.

Commercials Long +270. Shorts flattened 19,510 (i.e -19,510 contracts)

Non-Commercials/ Specs. LONGS flattened 18,799. SHORTS increased 1,785 contracts.

The highlight from the report analysis is the size of the Specs long covering. This can be interpreted several ways as Commercials step up their buying. This is the largest participant stepping up buying into Spec shorts. There is a snap on the horizon. Im running with the commercials on this one!

Commercials

Long +42,546. This is a tiny change WoW from a large increase of longs last week. The reading last week was in the 90th percentile of all changes in long positions all time in WTI. Commercials know something bullish we don’t. They are not however adding much as of last Tuesday- though importantly there is no decrease in their longs.

The length sits close to the 5 year high. Only off by about 80k contracts.

Commercials Long positioning.

Commercial Longs crowding 91% on 5year lookback.

Commercial shorts. Flattening out here more likely indicating oil companies/ drillers etc- those who are naturally long the crude and dropping hedging programs. Seasonally, exposing themselves more to upside rather than downside on price.

Commercials short positions.

Non-Commercials- Specs net open interest.

Specs net open interest.

Spec Longs-flattened 18,799. A WoW change magnitude in to the 80th percentile of all observed weekly changes. A significant liquidation of longs.

Spec Shorts– a small addition of only +1785 contracts. However this is brining their overall net short position close to 5 year highs. Currently at a net size of 192,412.

Specs short positioning on a 5 year look back are at 97.7%. Increased from 97.2% last week. They are running out of contracts by the look of it. Looking at the momentum chart above, see, the smaller but consistent addition of short contracts over the last 2 months. With a small decrease last week.

TRADE

I’m leaving my guidance the same as last week. The simple reason is that the daily structure on the long side held at the Y- level. Therefore, continuing the play this setup is what I am doing. Look to the 30min chart for the updated guidance.

WTI V October futures. Daily bars. YVWAP

WTI Futures. 30 mins bar. WVWAP

If you are interested in developing a VWAP trading edge, or in taking one to one monthly mentoring, get in touch at info@duggancapital.com