Oil Pullback During This Time of Year Is Common: Amrita Sen

The pullback in oil prices during this time of the year and a stabilization of prices in December has been noticed in the past five-years, Amrita Sen, Co-founder of Energy Aspects said in a CNBC interview.

• “It has been one of those crazy weeks… Positioning is a huge part of what’s going on. You always see this, remember in November, Thanksgiving, liquidity dries up and we have seen this for the last five years now. Massive, massive pullbacks and then we do stabilize eventually in December. I don’t think its any different year-end to book squaring. But also, I think higher interest rates are making matters worse because we have a lot of inventory management happening at year end by refiner, by physical oil traders and right now with the higher interest rates nobody wants to hold any inventory, so we have seen more destocking as well”, Sen said.
• “All of that combined, fundamentals, yes they are weaker seasonally, but they have not weakened to the point that we go from $97/bbl to $77/bbl for Brent,” she added.
• “Chinese demand is fine. In the West when we look at China, we focus too much on the PMIs, at least for oil it is far more consumer-driven today post Covid with gasoline and jet doing really well”, Sen said.
• When asked about Chinese demand she said: “They were very clear in saying demand is actually ok, inventories are low but it is the over capacity that has been building up, driving a lot of this. “
• “China has been destocking 600-800kbpd on the crude side but that is from the commercial side of things. SPR they were buying it, then they paused it during the really and we understand that they restarted buying it. But the SPR volumes are not that big about 20mn barrels by March of next year, so that is at the margin but of course it helps because you are going to see more Chinese buying in the coming months”, Sen said.
• In regard to the links between monetary policies and oil prices, Sen added that all historical correlations have broken down mainly due to a prolonged period of very low interest rates in recent years.