CRUDE IN SIGHT

Crude extends gains early Fri as gas crunch seen boosting oil demand - Sept. 24, 2021

  • Crude futures were building on Thursday’s two-month high settle early Friday in Asia. A continued revival of risk appetite in the broader financial markets after the US Federal Reserve calmed market nerves over tapering on Wednesday and growing expectations for Europe’s gas shortage to boost oil demand in the coming winter propped up Brent and WTI by 1.4-1.5%.
  • Vitol CEO Russell Hardy on Thursday joined a growing chorus of voices predicting that Europe’s unfolding energy crisis will lead to a spike in oil prices.
  • However, the festering debt crisis at Chinese real estate giant Evergrande is likely to keep the financial markets on the edge. Beijing, reluctant to bail out the China Evergrande Group, is asking local governments to prepare for the potential downfall of the company.

ARCHIVES

OIL VIEWSLETTER

Crude climbs to 7-week highs but Q4 optimism may be misplaced - Sept. 17, 2021

Brent vaulted over $75/barrel mid-week and was holding above that key psychological mark as we closed this report Friday evening in Singapore.

The two key categories of drivers – fundamentals as well as sentiment in the financial markets – were pushing in the same direction this week.

A second consecutive weekly slump in US oil stockpiles and the third week of a slow resumption of Gulf of Mexico oil production and Louisiana refining operations impacted by Hurricane Ida screamed “bullish”!

Meanwhile, the latest monthly data suggesting that US inflation may be levelling off, coupled with a smart rebound in retail sales in the country in August, provided additional tailwinds.

The US EIA, OPEC and the IEA released their monthly market outlook reports this week and the consensus view was that the Delta wave had only delayed, not derailed oil demand recovery.

But are we being too sanguine about Covid keeping its claws out of the global economy and oil demand resuming a steady upward climb in the upcoming northern hemisphere winter season?

ARCHIVES

BULLS & BEARS

Sep 2021: Neutral near-term, mildly bullish for next 3 months - Sept. 24, 2021

Crude prices are hovering around two-month highs as we write this Bulls & Bears report.

A receding global Delta wave gradually lifted crude out of the August doldrums, which had seen Brent slip-slide to $65. But some other factors – largely unanticipated – have since turbo-charged the recovery.

US offshore oil production and refining capacity impacted by Hurricane Ida, which hammered the Louisiana coast on August 29, has been slow in returning to normal operations, causing big crude and refined product draws on the country’s inventories. Coupled with a continued strong pace of demand recovery – US oil use on a four-week average basis has reached 99% of 2019 levels – it flashes a “buy” signal for crude.

Meanwhile, a snowballing gas shortage in Europe has begun pulling in some oil products as substitute fuels, adding to bullish sentiment. However, it remains to be seen to what extent the worst-case-scenario for the  winter heating season pans out. 

This week began with the broader financial markets in big turmoil, ahead of the US Federal Reserve meeting and wary of the repercussions of Chinese real estate giant Evergrande’s debt crisis. Fed Chairman Jay Powell managed to soothe market nerves, but the Evergrande saga is still unfolding.

Our latest Bulls & Bears report concludes 

  • Neutral sentiment for the near term 
  • Mildly Bullish sentiment for the next 3 months 

 

EXECUTIVE BRIEFING NOTES

OPEC+ gets back on the horse with tapering deal into 2022 - July 19, 2021

  • The OPEC/non-OPEC alliance ended a fortnight's suspense for the oil markets by agreeing a multi-layered deal on Sunday to taper its production cuts by 400,000 b/d every month through the rest of this year and the next, extend the master agreement by eight months to the end of December 2022 and give five members higher baselines effective May 2022.

Our quick insights on the development:

  • New supply policy involves cautious, controlled tapering till all cuts are unwound
  • Five members get new baselines, indicating art of deal-making still alive in OPEC+
  • Higher baselines do not mean higher overall output!
  • Setting a longer-duration supply policy and end-goal show evolution of strategy
  • As OPEC+ unwinds output curbs, it’s going to be all about market share
  • Challenges ahead: Iran’s return, expected US output rebound, quota-busting