OIL VIEWSLETTER

Crude jumps 30% on vaccine cheer but not immune to pullback - Nov. 27, 2020

  • Three Covid vaccine success stories catapulted crude to nearly nine-month highs this week, but the rally was showing signs of losing steam.
  • Infections, hospitalisations and deaths were hitting new highs as millions of Americans were projected to travel across the country for Thanksgiving, defying health experts’ advice to stay at home.
  • The winter surge of the virus has hammered consumer confidence on either side of the Atlantic. If year-end holidays trigger a worsening of the pandemic, oil demand as well as sentiment may take a hit.
  • Meanwhile, there has been some speculation that the surge in crude prices or fresh internal rumblings might derail the OPEC/non-OPEC alliance from staying the course on its production cuts when energy ministers meet early next week. We believe caution and patience will prevail, with an extension to the end of Q1 2021 at least. That may not have much impact on crude prices, as it’s been already baked in.
  • The Brent forward curve flipped into backwardation this week, but barely. Hedge funds and other major speculators remained net short in ICE Brent futures in the week to November 17, despite the vaccine cheer. That suggests Brent may see more hectic buying activity and a bigger price spurt than WTI if the vaccine momentum snowballs in the coming days and weeks.
  • Crude is also finding support from a steady drawdown in floating inventories, an important gauge of market balance.
  • We look at mobility data in Europe and the US for clues on how much the second and third waves of Covid might be affecting oil demand.

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BULLS & BEARS

Oct Bulls & Bears: Mildly bearish near-term, - Oct. 30, 2020

Our overall outlook for crude – mildly bearish for the near-term and neutral for the next three months – should be viewed in reference to current crude prices, around $38 for Brent and $36 for WTI. 

We see a continued downward pressure on crude for the next couple of weeks, hence the “mildly bearish” tag.

When taking in a broader time span of average prices till end-Jan, we are factoring in OPEC+ adjusting its supply policy in an effort to prop Brent back up at least into the low-$40s, which is why our outlook for the period is “neutral”.

 

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

Biden win neutral for oil market in the short term - Nov. 10, 2020

What will a Joe Biden administration mean for the US oil and gas industry, US foreign policy and the global oil markets overall? Here's what we see:

  • Projections of Iranian barrels flooding back into the market are overrated
  • Biden may need to water down green energy policies, O&G tax and regulatory plans
  • Pressure on China to continue but extreme volatility may be a thing of the past
  • Calmer, more conventional approach in the Middle East may ease geopolitical tensions
  • Likelihood of divided Congress points to policy compromise, hurdles for Biden
  • Trump’s roadblocks in transition may push back policy shifts well into 2021

CRUDE IN SIGHT

Crude jumps early Fri in Asia after OPEC+ opts for small supply boost from Jan - Dec. 4, 2020

Crude futures were spiralling up early Friday in Asia after settling nearly 1% higher on Thursday amid relief that the OPEC/non-OPEC supply deal for January 2021 and beyond struck the previous day had steered clear of the bearish probabilities of a 1.9 million b/d boost from January or even a complete collapse of the alliance over irreconcilable differences.

Energy ministers of the 22-member producers’ alliance meeting virtually on Thursday decided to boost collective output by 500,000 b/d from January.

They also agreed to chart the course for further increments or cutbacks as needed in instalments of 500,000 b/d on a monthly basis, starting with the February output.

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