The Calgary Stampede is an annual 10-day rodeo — and this year’s gathering had the second-highest attendance on record. To hear analysts at RBC Capital Markets tell it, the oil world of Canada also descends on the event, held in Alberta, which last year produced about 3.7 million barrels a day.
An RBC team led by Michael Tran, global energy strategist, said investors and companies both had tempered enthusiasm.
“Despite a rising tape, investor sentiment remains undecided, cautiously optimistic, or subdued from levels seen earlier this year, at best. Lack of conviction is not new, but when asked at our roundtable events, to self rank the current degree of sentiment on a scale of 1 (max bearish) to 10 (max bullish): three and four marked the downside, while the most bullish investors suggested a seven. The overwhelming majority were fives and sixes,” said RBC.
Front-month light sweet crude
CL00,
was at $74.06 on Tuesday, down 8% in the year, one of the worst performing of major assets, though it’s tested the $68 level on the downside as recently as late June. The voluntary production cuts by Saudi Arabia was a talking point.
“The market respects the Saudi cuts, and while several commodity traders grumbled about artificially tight markets, they also admitted that they will grit their teeth and get hauled along for the ride over the near term given the propensity to deploy risk,” said RBC’s assessment.
The weakness in crude has come even as China has registered three of the four strongest import months on record. “While this is constructive, the flip side is that global physical markets have been sloppy despite the strong haul. The trend is your friend, but port level crude inventories also remain bloated,” said RBC.
How the price may impact commodity trading advisors, or CTAs, was another talking point. “Given the recent uptrend, particularly through key moving average and trendlines, there were plenty of references to CTA activity. Many suggested that the CTA shorts would be squeezed and pushed to flip to cover if spot WTI were to hold and close out the week above $75/bbl (similar to the recent upside momentum shift through $70/bbl). CTAs flipping further constructive should entice more fundamentally driven players to get off the sidelines and chase the market rally,” the RBC team said.
Spot WTI ended Monday at $74.15.
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