Macro analysis of the global oil markets to distill the evolving risks and opportunities for energy industry stakeholders and wealth managers.
Case studies, research and analysis tailored to meet government policy as well as business needs. Specializing in market trends, commodity pricing, deregulation.
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Crude consolidates early Tue after hitting fresh four-month highs - March 19, 2024
Gaza deadlock keeps crude flitting around four-month highs - March 8, 2024
A lot happened this week around the Gaza crisis but for crude prices, nothing much changed. Brent settled at $83.55 on March 1; it was lingering about a dollar lower late Friday evening in Asia.
With two or three days to go before the start of Ramadan, a deadline the US had been working towards to broker a ceasefire and hostage deal between Israel and Hamas, a stubborn stalemate persisted. Though crude futures were softening slightly in intraday trading as we closed this report, it is hard to see a tangible pullback in prices, which currently embed a Mideast risk premium of around $6-7/barrel.
The nine OPEC+ members participating in voluntary cuts extended their pledges through Q2, as expected. This may be the last easy decision for OPEC+ for some time to come. Our calculations show the group’s 18 members bound by quotas are collectively targeting about 4.3 million b/d less crude production next month than a year ago. Actual supply in January this year was about 3 million b/d lower than the corresponding month of 2023. While that’s the market share OPEC+ has lost over the past 12 months, the nine members are carrying most of the burden. We examine the implications of the tricky situation.
Also in this issue:
Mar 2024: Mildly bearish near-term; neutral for April - March 15, 2024
After weighing all the bullish and bearish influences on crude, our latest Bulls & Bears report concludes:
US shale bending to new pressure, Exxon-Pioneer deal shows - Oct. 17, 2023
ExxonMobil’s $60-billion deal to buy rival shale driller Pioneer Natural Resources marks yet another phase of reorganization in the US shale sector, as it adapts once again to some big changes in its business environment.
The last major wave that forced shale to turn over a new leaf was in 2018, when investors and shareholders began enforcing capital discipline on the drillers. That mantra has stuck. Meanwhile, a trend accelerating now may see an industry pioneered by hundreds of small, independent drillers becoming consolidated in the hands of far fewer and bigger players over the next few years. In short, shale now needs economies of scale.
From a global oil markets macro perspective, one of the persistent key questions is whether, given shale’s resilience and adaptability, there is a chance that the US may reclaim its role as a swing producer at some point.
We examine that angle against the backdrop of other major shifts shaping the shale sector in this special report.
OIL IN 2024: Easing demand to weigh on crude, test OPEC+ unity - Dec. 22, 2023
As oil market participants turn the page into 2024, they are contemplating a picture of a global economic slowdown crimping demand growth, even as robust output growth from the US and a few other producers outside the OPEC/non-OPEC alliance tilt the balance towards oversupply.
Questions are swirling around the survival of OPEC+ and its supply management strategy in the face of new challenges awaiting it in the coming months. As Angola’s decision to quit OPEC this week shows, under the veneer of cohesion in the 22-member group, cracks are likely widening, especially on account of members who have lost substantial production capacity after effecting the deepest cuts ever through the Covid-induced demand destruction.
What else does the crystal ball show for the oil market in 2024? Sweet crude prices averaged 18% lower this year, bringing relief from last year’s 40% annual jump. What might next year look like?
We highlight the key elements to keep an eye on and take a closer look at the characteristics of the three main components of next year’s market: Supply, Demand and the Economy.
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