NN Investment Partners has closed its underweight exposure to Brent in anticipation of a recovery in oil prices.
Brent has been underperforming recently because of an increase in supplies – there has been a surprise rise in Saudi oil production since February while cracks have also appeared in OPEC compliance among other members of the cartel. Outside of OPEC, Russia, for example, has also been slow to engage in production cuts.
Furthermore, US oil production for this year and next have been partially hedged by the market, indicating a likely swift recovery in output this year, while US crude oil inventories remain stubbornly high.
However, Koen Straetmans, Senior Strategist Multi-Asset, NN Investment Partners, commented:
“We expect better seasonality going forwards. Refineries are expected to gradually return from April, probably earlier than usual given supportive refinery margins. US oil inventories may start to draw from here. Better seasonality, still supportive cyclical demand and a lingering hope of an extension of the production cut deal in the second half of this year lead us to close the underweight in Brent.”