CMC Gao Hua Comments on Falling Oil Prices due to Surplus Fears Despite the Tight Market Range

HONG KONG, Feb. 8, 2017 /PRNewswire/ — Oil today is dropping due to a stronger dollar and the ongoing expectation of an oversupplied market, says William Evans Head of Mergers & Acquisitions at CMC Gao Hua. There are three factors to consider the markets today.

Firstly, OPEC's exports to Asia were strong in January, and we are now looking at a much lower flow destined for America. December's loadings were bolstered by a large volume from Saudi Arabia, and our data now shows that total loadings last month dropped just under 3 million barrels a day for the first time since August, as OPEC is looking like favoring to keep its Asian clients well supplied.

With U.S. oil inventories around 18 million barrels from last year's record levels, and with oil refiners moved into maintenance situation, there should be some concerns about a lack of supply.

Secondly, we are now shifting into the second month of OPEC / NOPEC production cuts, and it is expected that the tighter supply is pushing the price of Brent higher. This situation when the near-term prices are higher than prices one year out has not been seen since 2014 when prices were back in the range of one-hundred dollars a barrel.

Thirdly, the situation of tight supply is also enticing people into a record of speculative bullish bets. The latest CFTC data showed net-long positions in WTI have risen to their highest level since records began. We have expressed some concern recently about these numbers touching all time highs, and when they do, they tend to signal a reversal of prices.

Mr. Alexander Harrison who is a Senior Vice President at CMC Gao Hua also commented that in recent weeks, there has been a focus on the potential impact of oil flows from a U.S. border tax. This highlights who would be the worst hit by a 20% tax and while Mexico would be the biggest loser, it is also paramount to realize that countries in Asia like Malaysia, Thailand, and Vietnam would also be profoundly affected.

Contact:

CMC Gao Hua | +82-2-6022-4246 | [email protected] | http://www.cmcalliance.com