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CRUDE IN SIGHT

Crude static early Fri, awaits direction from OPEC+ committee meet - 21 Sep 2018

  • Crude futures were mostly flat in a slow start to trading on Friday morning in Asia, with no fresh headlines swaying sentiment or much momentum carried over from Thursday’s session in the West.
  • A tweet by US President Donald Trump on Thursday, reminding the Middle Eastern oil producers that American money keeps them “safe”, and demanding that “the OPEC monopoly must get prices down now!” put some bearish pressure on crude in a week otherwise dominated by growing bullishness on account of Iran supply worries and by a weekly drawdown in US crude inventories.
  • The market will be closely watching the decision and ministers’ comments from an OPEC/non-OPEC Joint Ministerial Monitoring Committee meeting in Algiers this weekend. The meeting is anything but routine and even controversial, as it is expected to apportion new quotas to the participating countries to factor in the OPEC/non-OPEC ministers’ decision in Vienna on June 23 to boost collective output by 1 million b/d.

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ARCHIVES

Oil Viewsletter

Trump tweet and OPEC meet can't keep Brent from racing towards $80 again - 21 Sep 2018

  • Saudi Arabia sending a message through the media this week that it would be “comfortable” with Brent rising above $80, at least in the short term, while the market adjusts to the loss of Iranian barrels, suggests that the de facto OPEC leader may be running out of capacity as well as patience.
  • Barely hours after meeting US Energy Secretary Rick Perry in Moscow last week, Russian Energy Minister Alexander Novak proceeded to criticise US sanctions against Iran as “unproductive” and “wrong”.
  • Saudi Arabia and Russia, steering the ship on the OPEC/non-OPEC production policy, look like they have had enough of the US aiming to squash Iranian supplies with its sanctions, while exhorting them to pump more to plug the shortfall, and lambasting them for restraining production and driving up prices.
  • It has become a tough balancing act for the duo, who have faced flak from Iran’s enraged oil minister Bijan Zanganeh since their agreement of June 23 to boost output by 1 million b/d. The rhetoric from Tehran rose this week, targeting a planned re-allocation of country quotas at a committee meeting in Algiers this weekend.
  • Zanganeh has a valid argument that the six-member OPEC/non-OPEC Joint Ministerial Monitoring Committee, or JMMC, is not authorised to reallocate output quotas — a decision that needs to be agreed by all the ministers. But he is bound to be ignored.

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BULLS & BEARS

Supply concerns dominate - 19 Sep 2018

  • The oil market sentiment is decidedly getting more bullish.
  • Though demand worries persist and even grow with the escalating US-China tariffs war, those have proved hard to quantify and for the time being, supply fears on account of the looming US sanctions against Iran are dominating.
 

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ENERGY RADAR

Oil in the time of "Super OPEC" - Q4 2018

  • Starting next year, OPEC’s 15-member organization is planning to become turbo-charged. A permanent alliance with Russia and nine other non-OPEC oil producers will aim to pro-actively maintain global supply-demand balance.
  • A new “charter” of cooperation between OPEC and its non-OPEC collaborators will bring together 25 countries that collectively account for around 51 million b/d of production, over half the world’s current oil supply.
  • How strong and how different can the institutionalized collaboration be? Will it repeat the mistakes of the past or be future-proof? Will a “Super OPEC” be able to emerge from the shadow of doubt, disapproval, skepticism and consumer ire that hangs over OPEC, or is it doomed to fail?
  • In this quarter’s issue of Energy Radar, we examine the circumstances leading up to the upcoming inflection point for OPEC and share our view of what might lie ahead.

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