OIL VIEWSLETTER

Resurgent virus dominates frail demand support for crude - Oct. 16, 2020

  • Crude sentiment got a lift this week from strong China and India September oil demand data but was pressured lower by continuing resurgence of the coronavirus.
  • The market was drawn to a new winter narrative — a shift from worries over stalling oil demand amid fresh lockdowns and restrictions across Europe, to expectations of higher energy consumption through a colder-than-average 2020-21 La Niña winter. But a colder winter is hardly a boost for oil.
  • Some market participants turned bullish after the International Energy Agency’s latest monthly report projected an average stock drawdown of 4 million b/d but the sentiment boost proved short-lived.
  • OPEC’s monthly report unveiled sizeable downgrades to expected demand for its crude in the coming months, which sharpened the focus on the OPEC/non-OPEC alliance’s production policy for next year.
  • The “compensation mechanism” under which OPEC+ is making members offset any overproduction in previous months with deeper cuts until the end of the year was off to a slow start in September.
  • Chinese crude imports rebounded in September from August but it is not an unmitigated bullish signal.
  • The stimulus talks remained deadlocked and receded to the sidelines for the oil market, where they are likely to remain unless a miracle produces a deal before the November 3 presidential election

ARCHIVES

BULLS & BEARS

Sep Bulls & Bears: Mildly bearish near-term, Neutral for Q4 - Sept. 11, 2020

This issue of Bulls & Bears sees us moving one notch towards bearishness both in the near term and for next quarter compared with the August issue.

We have a Mildly Bearish view on crude prices for the next few days and a Neutral view for the coming quarter. 

The current crude prices – Brent around $40 and WTI around $37 – should be viewed as a baseline for the outlook. 

ENERGY RADAR

energy radar first report - Jan. 13, 2020

Shortly before the markets opened, US President Donald Trump tweeted that he had authorised the release of stocks from the country’s Strategic Petroleum Reserve if necessary, to keep the y 9.30 am Singapore time (0130 GMT), three and a half hours after trade opened for the week on the CME and ICE futures exchanges, crude had calmed down somewhat, to gains of 10-12% versus Friday’s clsoe. markets

BRIEFING NOTES

Trump's Covid diagnosis throws oil market a curveball - Oct. 2, 2020

  • News of US President contracting Covid-19 sends risk assets into a tailspin, Brent below $40
  • Questions swirl around impact on Trump’s health, policy, election campaigning
  • Uncertain and multiple ramifications inject volatility into all markets
  • A one-two punch for crude, which was already under pressure

What are the things to look out for in terms of the ongoing psychological impact on the oil market and the fundamentals. With crude spiralling back towards three-month lows, all eyes may once again be on OPEC+.

The fuss over member countries not delivering on compensatory cuts has implications for the group's cohesion, but is impacting oil prices only at the margins.

OPEC+ may now face the difficult choice of revisiting its decision to put an extra 2 million b/d into the market over August-December. The question is, will the producers' alliance walk Prince Abdulaziz's talk a fortnight ago, warning short-sellers that they will hurt "like hell"?

CRUDE IN SIGHT

Crude slumps early Tue, discounting chances of US stimulus deal - Oct. 20, 2020

Crude futures were sliding early Tuesday in Asia as market participants assessed a slim chance of House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin managing to forge a compromise on the second US stimulus package in the narrow window of time left.

Meanwhile, a closely-watched OPEC/non-OPEC committee meeting on Monday added to a downbeat view of the oil complex as the alliance’s de facto leaders, Saudi Arabia and Russia, acknowledged a downside risk to global demand recovery but left the market guessing on the group’s planned 1.9 million b/d supply boost from January 2021.

A steady ramp-up in Libyan production is also weighing on oil market sentiment. Production at the country’s largest oil field, Sharara, has reportedly reached 150,000 b/d, equivalent to half its capacity.

ARCHIVES