Crude continues to climb beyond 6-month highs early Tue on Iran supply worries - 23 Apr 2019

  • Crude futures were continuing to strengthen early Tuesday in Asia, driven by an expected supply tightness as a little over 1 million b/d of Iranian exports are likely to disappear from the market starting next month.
  • In a surprise move, the US on Monday said it would not be extending Iran sanction waivers for any country after the current exemptions expire on May 2.
  • The decision to end the waivers is intended to bring Iran’s oil exports to zero and force Tehran to the negotiating table over a set of demands laid out by the US, the White House said in a statement.
  • US Secretary of State Mike Pompeo said on Monday that Saudi Arabia and the UAE had assured the US that they will ensure the market has “appropriate supply”.  

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Oil Viewsletter

Brent eyes $72 in crude's upward trek but further upside limited - 19 April 2019

  • Brent closed at a fresh five-month peak of $71.97/barrel on Thursday, ahead of the Good Friday holiday. It had flirted with $72 during intraday trading earlier in the week, but failed to breach that psychological mark.
  • For the most part, the upward momentum stemmed from optimism over the direction of the US and Chinese economies. But is there a positive-news bias among investors? Though US and China continue to inch closer to a trade deal and Beijing reported surprisingly strong Q1 GDP data this week, there are plenty of pockets of decelerating economic growth across the world.
  • It will be a complex set of factors that OPEC and its non-OPEC allies will need to measure and weigh when they meet towards the end of June to decide on their production policy for the second half of the year. We expect the cuts to be rolled over, but with a pledge to not exceed the agreed overall amount of reduction.
Also in this issue: -          Feb decline in OECD oil inventories in the spotlight -          Saudi-Russia differences on oil supply policy could grow -          Iran sanction waivers likely to continue -          Aramco makes a move on India’s Reliance Industries: the Saudi company’s formidable new avatar -          US shale growth is clearly slowing. The question is, to what extent?

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Crude rallies, but checked by economic worries - 20 Mar 2019

  • Our latest Bulls & Bears report notes that tightening crude supply has gradually elbowed out broader bearish financial market concerns that were dominating oil market sentiment since the fourth quarter of 2018, and has prompted a 25% rally in Brent since the start of this year.
  • OPEC production cuts are off to a strong start and reached full compliance in February, while fresh threats hang over Venezuelan and Iranian supply, both thanks to US sanctions.
  • However, global economic headwinds are still blowing, keeping crude’s rally in check. The positive impact of an expected US-China trade agreement has been largely priced into crude over recent weeks. Finally, OPEC and its de facto leader Saudi Arabia are prone to come under pressure from Trump’s Twitter admonitions if crude extends its rally much beyond current levels.
  • Over the medium term, we see Brent in the $60-70/bbl range.

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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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