Oil Slides As Iraq Vows No Interruption In Exports Amid Violence

Oil Slides As Iraq Vows No Interruption In Exports Amid Violence

Oil tumbled, completely reversing and then some Monday’s biggest rise in six weeks as traders still weighed potential supply disruptions, including the possibility of an OPEC+ output cut offset by hopes that the Iraq social unrest won’t translate into export cuts after Iraq’s state oil marketing company said exports would continue uninterrupted despite the recent violence. Striking a more bullish note, Goldman Sachs urged investors to “buy commodities now, worry about the recession later” but as always, the market knows to fade every single Goldman call and this one was no different.

Some more details: according to Alaa Al-Yassiri, director general of state-run oil marketing company SOMO, Iraq’s oil exports are continuing uninterrupted amid violence in the country. Iraq plans to export 3.35 million b/d of crude from the south and between 75,000-90,000 b/d from the north of the country this month, he said. The country has the capacity to boost oil exports to all destinations and it won’t refuse any request for more oil.

Elsewhere, OPEC crude production rose by 470,000 b/d to 28.43 million b/d in August, JBC Energy said in a note. Saudi Arabia’s output increased by 70,000 b/d to 10.55 million a day, Libya’s gained 290,000 b/d to 990,000 a day, while UAE pumped 3.19 million b/d, 70k a day more than in July.

As a bonus, here is a snippet from the latest US Oil and Gas reported by BofA’s Doug Leggate in which he published his “Discussion with BofA oil traders” and features Peter Doyle, Director of Oil Trading, BofA Securities. Here are the highlights from the discussion:

Oil markets: Markets remain focused on short term demand as seasonal changes, bad economic data coming out of Asia, and refinery turnarounds weigh on prices. However, markets are still expecting to end the year strong as the SPR ends, taking ~1mnbpd of the market, and refineries run hard to try and build distillate stocks for winter in the EU. Gas to oil switching will be a large driver of crude demand too, expect products to lead oil.
Oil trading: Oil markets remain in an irregular position due to a lack of liquidity. Saudi Arabia’s Energy Minister’s comments were valid since there is no position in the market. The Russia Ukraine conflict increased volatility where the commodity price could move $15 in a day increasing the cost to trade and driving positioning out of the market. Also, producers hedging less has removed sellers in the market.
Gasoline demand: Data right after the July 4th weekend was ugly but it is normally noising during that time of year. We could still see gasoline cracks roll up in 2023 and 2024.

Finally, while oil prices are clearly on the defensive as of 10am ET, largely a function of the complete reversal of CTA buying seen on Monday in the extremely illiquid oil market, expect this to reverse again once the same CTAs and other fast money traders realize that the biggest headline of the morning…


… is anything but bearish for commodities.

Tyler Durden
Tue, 08/30/2022 – 10:00

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