CRUDE IN SIGHT

Crude rebounds early Tuesday - April 7, 2020

Crude futures were bouncing up from Monday’s lower close early Tuesday in Asia. The oil market is being whipsawed by alternating scepticism and confidence that the OPEC/non-OPEC alliance will be able to pull off a massive production cut deal in response to the global oil demand lost from a plunge in global economic activity.

OPEC has not asked the US to participate in any cuts, President Donald Trump said on Monday. "I think it's happening automatically but nobody's asked me that question yet so we'll see what happens," Trump told a press briefing Monday afternoon in Washington. “It’s happening” was a reference to US production declining naturally under pressure from low oil prices. “I think the [US production] cuts are automatic if you are a believer in free markets,” Trump said.

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OIL VIEWSLETTER

OPEC+ attempts resurrection to save a world drowning in oil - April 3, 2020

Exactly a month after the shocking collapse of OPEC+ and the declaration of a price war by heavyweights Saudi Arabia and Russia, the producers’ alliance is preparing to come back to the table on Monday.

Crude staged the biggest single-day percentage spike in its history on Thursday after Trump tweeted that Saudi Arabia and Russia were going to lead OPEC+ into production cuts of 10-15 million b/d.

There are two big questions facing the oil market now:

  • Can the producers indeed deliver such gigantic cuts
  • Will the US join in the effort by restraining its own output?

We analyse the latest twist in the oil market and its consequences. 

BULLS & BEARS

Efforts to end oil price war mildly bullish - April 2, 2020

The raging coronavirus pandemic in the US and major European economies has chopped off an estimated quarter of the world's oil demand and will remain a major bearish force on prices until the peak is behind us.

However, repeated assertions by Trump this week that Saudi Arabia and Russia are in discussions again and close to a deal were starting to have some impact on market sentiment. 

A Bloomberg report on Thursday that the Chinese government has instructed agencies in the country to start buying crude to put into SPR and commercial storages had propped up prices by 9-10%, though how long that support lasts remains to be seen.

On balance, the bearishness from the extensive lockdowns and containment measures across the globe, due to remain in place through most of April, far outweights the mild support from efforts, mostly by the US, to try and get Saudi Arabia and Russia to put their conflict aside and work towards rebalancing the market.

 

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ENERGY RADAR

Special Note: WTI/Brent spread - April 7, 2020

  • The WTI/Brent spread crunched sharply through February and March
  • Brent came under relatively greater pressure from the pandemic and global demand loss
  • The collapse of the OPEC/non-OPEC deal on March 6 dealt Brent a harder blow
  • Brent futures saw a far bigger exodus of speculative money through February-March than WTI
  • This report examines the factors at play and provides an outlook for the spread

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