WTI and Brent crude oil were smacked early this morning in Europe trading with a plethora of bearish news creating a perfect storm for the sell-off today.
Two weeks ago we discussed Libya coming back online on September 18th. They were producing 1.1M BPD before the oil blockade in January. As of today, 300K BPD is back online, far faster than anticipated. In addition, there was a rumor that their largest field Sharara along with the El-Feel would be coming back online this weekend, which would have effectively put them at 750K BPD (this rumor was later quelled which seemed to halt the decline) In addition, OPEC September output was 160K BPD higher than August, in the Reuters survey released today. On top of that, news that Madrid will go into full lockdown in the coming days followed on the heels of Moscow announcing they would be sending 30% of their staff home due to COVID-19. Adding to the pressure was the lack of direction on a stimulus package.
Copper had the largest one-day sell-off since March of 2020. Copper has been largely buoyed by a wave of Chinese frantic stimulus-induced buying coupled with mine closures in Chili, Brazil, and Peru due to COVID-19 leading to a decline in LME stocks. Today, LME reported at 48% increase in copper stocks and Shanghai stocks rose for the 9th consecutive week. Mines have all largely come back online and it seems China’s stockpiling (“false recovery”) has come to an end or at least a halt. In addition, the market was technically extremely overbought and CFTC COT report last week showed speculators extremely long, providing another perfect storm in the commodity markets today.