Evening from Europe!

What a bloodbath in long oil bets today, and we are bleeding alongside the crowd as we are down 5.7% in our long bets in the CLN4 future.

The OPEC+ meeting over the weekend did not fuel a bullish supply narrative as we can (at best) expect the status quo. The supply cuts were prolonged (as was our base-case), but assuming that the cuts will actually be reversed by June or September 2025, which seems to be the forward guidance from OPEC now, we’d have to see a much stronger business cycle in Manufacturing for that to match with the demand side.

We do also note that the OPEC+ production is procyclical empirically (see chart 1), so an increase in the production is actually a sign of improving demand trends rather than the opposite. The OPEC group is betting on a cyclical upswing into 2025, which we currently concur with, but the demand side will have to do the heavy lifting for oil bulls, not the supply side.

Chart 1: The business cycle needs to rebound for OPEC to be right