Crude in a free fall early Monday - 18 Jun 2018

  • Crude futures were on a slippery slope early Monday in Asia, as market players fixated on an increasingly certain supply boost decision from the OPEC/non-OPEC meeting in Vienna starting Friday. The bearish pull from an expected easing of output cuts by the producers, which gripped sentiment on Friday and yanked Brent and WTI futures down by 1.8-3.3%, dwarfed fresh supply problems in OPEC members Venezuela and Libya.
  • Over the past few weeks, expectations had swayed between a “yes”, a “no” and everything in between with respect to the likelihood of OPEC/non-OPEC ministers agreeing to put more barrels into the market at their upcoming meeting.
  • Russia and Saudi Arabia will seek a production hike of 1.5 million b/d starting in the third quarter, Novak said on Saturday. While the proposal could still face opposition from price hawks and producers simply not capable of increasing output, Novak’s latest statement is a clear sign that the de facto leaders of the OPEC and non-OPEC blocs will ram through a deal to boost supply.

Please sign up for a free trial or subscribe below to access the full report. 


Oil Viewsletter

June 22: A tough meeting likely to relax OPEC/non-OPEC cuts - 1 Jun 2018

  • Brent plunged nearly 6% from its 42-month high settle of $79.80 at the beginning of the week after the energy ministers of Saudi Arabia and Russia, de facto leaders of the OPEC and non-OPEC producers cutting output, said on May 25 that they had agreed on the need to raise supply by 1 million b/d.
  • However, by mid-week, doubts set in that all the OPEC and non-OPEC ministers were on board with the idea and would agree to ease the cuts when they meet in Vienna on June 22. The OPEC/non-OPEC meeting later this month will likely be a contentious one but we expect the cuts to be relaxed, likely starting from July 1. With several producers in both camps unable to sustainably increase production, it could end up being an unconventional arrangement, involving bigger contributions by Russia and Saudi Arabia.
  • The proposed 1 million b/d increment is conservative, in our view, as close to 1.5 million b/d has been removed from the market due to unavoidable declines in Venezuela, Mexico, Angola, Kazakhstan and Azerbaijan as well as outages in Nigeria and Libya in recent months.
  • Plus: Permian bottleneck weighs down WTI, blowing out discount to Brent; India and China brace for uncertainty, cuts in Iran crude imports

Please sign up for a free trial or subscribe below to access the full report. 


Overall outlook rangebound, consolidation mode - week of 28 May-1 Jun 2018

  • ICE Brent and NYMEX WTI crude futures have shed more than 5% since the Saudi and Russian energy ministers meeting in St. Petersburg May 25 agreed it was time to raise supply by about 1 million b/d.
  • Though the decision is expected to sail through at the OPEC/non-OPEC ministerial meeting in Vienna on June 22, there is a chance that the agreed increase will be smaller, erring on the side of caution. The additional barrels have yet to hit the market and the market may finally pause on the furious sell-off.

    Please sign up for a free trial or subscribe below to access the full report.


Price rally is sticking but hinges on OPEC/non-OPEC discipline - January 2017

  • With global oil demand growth likely to be tepid again in 2017, the much-awaited market rebalancing hinges on suppliers honouring their commitment to cut.
  • OPEC is not only seeking resurrection, but will be making history if it manages to actually balance crude in the target $50-60/barrel range.
  • US shale patch activity and rig counts picked up through the second half of 2016, but does this mean tight oil production is poised for a rebound?
  • Downside risk to demand growth: Consensus estimates for a 1.35 million b/d rise in global oil consumption this year might be overshooting.
  • A double whammy from rising crude prices and a stronger US dollar to emerging economies could dent demand growth in major consumers such as China, India.

Please sign up for a free trial or subscribe below to access the full report.