Oil long positions slide 3% last week

Slip Sliding Away!

Oil prices failed to get a boost on the better than expected official Chinese PMI data, perhaps because the data in Europe was a bit mixed. In China the official Purchasing Manager Index from the government came in at 53.1 in March, up from 51 in February. The March reading in the official report was the fourth consecutive monthly increase and totally different than the HSBC's China PMI number, which came in at print of 48.3. The HSBC'S reading has raised questions about whether or not China is headed for a hard landing or is able to keep a steady flight. The HSBC number has been below 50 for five months in a row and headed in a different direction than the official government data.

In the UK it seems that while the manufacturing sector is growing, hitting a 10 month high, the PMI for the manufacturing sector rose to 52.1 in March. Yet inflation pressures may hurt manufacturers as soaring oil prices seem to be squeezing UK manufacturers.

In the meantime it seems the oil market lost some of its bullish momentum. Dow Jones reported, "The Commodity Futures Trading Commission reported Friday that the number of speculators betting U.S. crude futures would rise fell by nearly 3% last week. Later in the day Intercontinental Exchange Inc. will release similar data from the European benchmark. "Recently, net long positions in Brent were just short of the highest level they had achieved since records began in June 2011, meaning there is also potential for correction here — the latest drop in prices at least would suggest this."

Iraq is accusing the Kurds of selling oil through Iran. This should be interesting to watch. Iraq’s oil production is soaring. The AP reported that, “Iraq's northern Kurdish semiautonomous region has halted oil exports over a payment row with the central government in Baghdad, causing further deterioration in its relationship with the country's Arab-led government. The Kurdistan Regional Government has unilaterally struck scores of deals with oil companies in recent years, even though Baghdad says it has no right to do so." The two sides struck a tentative deal in 2011 by which the Kurds will send the oil to Baghdad, which sells it, and each side then takes 50% of the revenues.

In a statement issued late Sunday, the region's Ministry of Natural Resources said Baghdad failed to send any money since May, even though it had been exporting 50,000 barrels per day. They said only two payments of $514 million have been made with the last made in May 2011.  "After consultation with the producing companies, the Ministry has reluctantly decided to halt exports until further notice," the statement said. "There have been no payments for 10 months, nor any indication from federal authorities that payments are forthcoming." It added that oil exports will be resumed once payment issue is resolved, adding that the production will be diverted to the local market for processing and refining to generate an alternate source of cash flow for the producing companies. Last week, Iraq's Finance Minister Rafia al-Issawi said Baghdad already approved payment of $560 million to oil producers in the Kurdish region but it was awaiting final audits.”

Brent Crude may worry a bit about maintenance. Dow Jones reports that Royal Dutch Shell PLC (RDSA) will start planned maintenance work on its Shearwater platform in the North Sea in the near future, a company spokesman told Dow Jones Newswires Monday.   The company initially brought the maintenance work forward last week after a serious gas leak at Total SA's (TOT) nearby Elgin field forced it to partially evacuate staff and suspend operations at Shearwater and the neighboring Noble Hans Deul drilling rig. "The maintenance has not begun yet...we are taking precautionary measures to ensure the safety of our staff," the spokesman said. Shearwater produces around 50,000 barrels of oil equivalent a day.

About the Author
Phil Flynn

Senior energy analyst at The PRICE Futures Group and a Fox Business Network contributor. He is one of the world's leading market analysts, providing individual investors, professional traders, and institutions with up-to-the-minute investment and risk management insight into global petroleum, gasoline, and energy markets. His precise and timely forecasts have come to be in great demand by industry and media worldwide and his impressive career goes back almost three decades, gaining attention with his market calls and energetic personality as writer of The Energy Report. You can contact Phil by phone at (888) 264-5665 or by email at pflynn@pricegroup.com. Learn even more on our website at www.pricegroup.com.


Futures and options trading involves substantial risk of loss and may not be suitable for everyone. The information presented by The PRICE Futures Group is from sources believed to be reliable and all information reported is subject to change without notice.

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