CRUDE IN SIGHT

Crude surges 10% on massive Saudi production outage - 16 Sep 2019

  • Crude futures soared by up to 20% in the first few seconds of trading early Monday in response to Saudi Arabia being forced to shut in nearly 60% of its production on Saturday following attacks on two of its major oil and gas facilities, which led to explosions and massive fires.
  • By 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. 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 markets well-supplied.
 

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Oil Viewsletter

Demand worries prevail over trade optimism, OPEC compliance pledges - 13 Sep 2019

  • Is Donald Trump turning more pliable and willing to compromise on the international stage, perhaps with an eye on the 2020 presidential elections?
  • It certainly seemed so from two of his big moves this week: He contemplated reducing Iran sanctions in a bid to get Iranian President Hassan Rouhani to the negotiating table, and delayed a planned hike in import tariffs against China as a “goodwill gesture”.
  • But it’s Trump, the paragon of unpredictability. So, we will have to wait and watch.
  • A breakthrough in the US-China trade war (finally) would be somewhat bullish for crude, while a rapprochement with Iran (unlikely) will be bearish.
  • For the time being, the oil market remains in the grip of continuing downgrades in demand growth expectations, while non-OPEC supply is expected to continue climbing.
  • Plus: Our key takeaways from this week’s Asia Pacific Petroleum Conference in Singapore.

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BULLS & BEARS

Trade war hems in Brent around $60 - 5 September 2019

  • Our latest Bulls & Bears report finds our view on oil prices constructive for the next several days,thanks mainly to the Chinese commerce ministry’s announcement this morning trade negotiations with the US are set to resume next month.
  • The boost in market sentiment may not last long, given that the development provides but a sliver of hope amid a continuing deluge of weak macro-economic data and the realisation that the US and China have major hurdles to clear before reaching a deal.
  • Based on the factors in view today, over the next 3-6 months, we see crude prices relatively range-bound around current levels. It would take a US-China trade agreement for a major break to the upside, but that could take a while. Meanwhile, we expect the OPEC/non-OPEC cuts hold a floor around the high-$50s for Brent.
   

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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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