Oil: Bullish market outlook into year-end – Rabobank

According to analysts from Rabobank the seasonal bottom for refinery runs in the United Stated is likely behind us, setting the stage for an improving crude demand outlook from now through year-end.  

Key Quotes:  

“In our view – overblown demand concerns have been holding oil markets back since May of this year when weak economic forecasts and calls for a US recession began sprouting up in earnest. While crude demand has indeed been sluggish of late – it has been more a function of seasonal refinery maintenance rather than weak end-user demand. In fact, both distillate and motor gasoline inventories in the US are currently running at a deficit to last year’s levels and we are forecasting US crude stocks to hit multi-year lows in November.”

“While most traders and analysts have been focused on the demand side of the ledger in recent months – very few seem to have noticed that global oil supplies flipped into a year-on-year deficit in September.”

“We maintain our bullish oil market outlook into year-end and are encouraged by this week’s price action and fundamental data. We view this week’s move higher as a convincing break-out and a decisive victory for the oil bulls in what has been a tough fought battle over the past three weeks. We are forecasting US crude stocks to hit multi-year lows in November which combined with an improving macro outlook and tightening supply/demand balance should drive crude prices higher. We are also forecasting a surge of speculative buying into year-end as momentum and trend signals turn positive and CTAs are forced to cover their “short” position and reverse to a “long” bias.”