The Calgary Stampede, an annual 10-day rodeo extravaganza, recently saw its second-highest attendance on record. However, this event is not just about thrilling rodeo performances and entertainment. It also serves as a gathering place for the oil world of Canada, specifically in Alberta, which happens to be the largest oil producer in the country, with an output of approximately 3.7 million barrels a day last year.
Investors and companies attending the Calgary Stampede this year displayed a level of cautious optimism rather than unbridled enthusiasm. RBC Capital Markets’ team, led by Michael Tran, a globally recognized energy strategist, highlighted this tempered sentiment among participants.
“When asked to rank their current degree of sentiment on a scale of 1 (max bearish) to 10 (max bullish) at our roundtable events, only a few expressed extreme bullishness, suggesting a seven. On the other hand, the vast majority fell somewhere in the middle, with a sentiment ranging from three to six,” revealed RBC.
While financial markets have shown signs of uncertainty throughout the year, with some major assets experiencing underperformance, front-month light sweet crude CL00, -0.05% stood at $74.06 on Tuesday. Although it has seen a decline of 8% since the beginning of the year, with the price briefly testing the $68 level in late June, the recent voluntary production cuts by Saudi Arabia have played a significant role in shaping market discussions.
In conclusion, the Calgary Stampede not only offers a thrilling rodeo experience but also serves as a platform where industry professionals and investors gather to discuss and analyze the state of the oil world in Canada. Despite some lingering uncertainty, there remains a cautious sense of optimism among attendees, reflecting the ongoing fluctuations in the global market.
The Impact of Saudi Cuts on Crude Market
According to RBC’s assessment, the market has shown respect for the Saudi cuts despite some complaints from commodity traders about artificially tight markets. However, they also acknowledged that they would go along with the ride in the near term due to the need to take risks.
China’s record-breaking import months have provided some positivity. Nevertheless, RBC pointed out that global physical markets have been lackluster despite the strong haul. Additionally, there are still bloated crude inventories at the port level.
Potential Effects on Commodity Trading Advisors (CTAs)
The discussion also involved the potential impact on Commodity Trading Advisors (CTAs). With the recent upward trend, especially in key moving averages and trendlines, many references were made to CTA activity. It was suggested that if spot WTI holds and closes the week above $75/bbl (similar to the recent momentum shift beyond $70/bbl), CTA shorts might be squeezed and pushed to cover. This could entice more players with a fundamentally driven approach to actively participate in the market rally.
As of Monday, spot WTI closed at $74.15.