UBS on oil after the attack on Saudi production facilities

Where we are at is its expected there will be supply disruptions, for how long depends on how quickly the facilities can be repaired, but in the very short term, ie coming days, its expected Saudi can continue supply from stocks. UBS caution:
  • spare capacity is limited
  • However, spare capacity is primarily in the hands of the Saudis UBS assess this at 70% of spare capacity)
  • add that, with 70% of spare capacity, attack is a reminder that large disruptions in Saudi Arabia  mean the ‘reaction function’ of OPEC to cover any supply disruptions is limited
ICYMI, attacks on Saudi oil facilities over the weekend, check the links for the news and what the implications are:

Goldman Sachs oil price forecasts after the Saudi attack

Comments from GS’ Energy Research & Senior Commodity Strategist

  • Brent oil up $3 to $5 if the shutdown time is less than a week
  • Up $5 to $14 if the shutdown is longer, 2 to 6 weeks
  • If the shut down of production is more than 6 weeks price to over $75, shale oil production gets a big boost

OPEC+ statement: Important for all countries to reach full conformity with output cuts

OPEC+ releases its statement after today’s meeting

  • Compliance reached 136% in August
  • Non-compliant countries have pledged to achieve 100% compliance
Essentially, that can be read as nothing of real importance was actually discussed in Abu Dhabi today. Talk of achieving full compliance among those who aren’t playing ball sounds good, but I just don’t see how OPEC can enforce anything in that regard.
As mentioned earlier, this is one of those ideas/proposals that sound great on paper but is a nightmare in terms of execution.

Saudi oil minister: Every OPEC+ country should pull its weight

Comment by Saudi oil minister, Prince Abdulaziz

OPEC+
  • OPEC+ must maintain high degree of cohesion
  • Every country should comply with oil output cuts
  • Will share our course of action for the future after today’s meeting
Some cautionary words before the OPEC+ JMMC meeting begins later today in Abu Dhabi. Expect there to be plenty of talk and discussion on production cuts (current and future) but there shouldn’t be any firm consensus or decision reached in the meeting today.

ANZ oil strategy – expect prices to rise

A snippet from ANZ’s latest on oil,

  • replacement of Saudi Arabia’s Energy Minister, Khalid Al-Falih, with Prince Abdulaziz al Salman …  We don’t see the move as a prelude to significant change
  • As OPEC and its allied producers (such as Russia) meet in Abu Dhabi, they face unprecedented uncertainty. 
  • … tension between the US and Iran/Venezuela continues to impact the market. 
  • trade tensions are now also weighing on manufacturing activity
  • Global vehicle sales, a key determinant of gasoline demand are on track to fall 6% in 2019
  • PMIs remain weak across the world
  • We have subsequently reduced our forecast oil demand growth to 1mb/d this year (from 1.2mb/d)
  • Even so, we see sizeable stock drawdowns in Q4. With crude oil well below Saudi Arabia’s target of USD80/bbl, we feel they have no choice but to continue the current production cut agreement to help support current prices. However, the ability to push prices higher looks limited.
A snippet from ANZ's latest on oil,  
ANZ mention the meeting in Abu Dhabi today. Its a monitoring committee meeting bute yeah, there will be discussion of price, you can coutn on it.

The Trump-Bolton rift may have been about easing Iran sanctions – report

Oil drops

WTI crude fell another $1 after Bloomberg reported that Trump discussed easing Iran sanctions in order to restart talks. Bolton ‘forcefully’ argued against the move while Mnuchin supported it. Later in the day, Trump fired his national security advisor.
Trump may meet Iran’s Rouhani on the sidelines of the UN during the week of Sept 23.
WTI is down $1.27 on the day to $56.15. USD/CAD also ran to a session high, hitting 1.3197

Iraq oil minister says that it is too early to talk about deeper production cuts

This just reaffirms expectations heading into this week’s meeting

A similar message to what we heard from Oman earlier in the session. As such, don’t expect any major announcements – though there may be rumoured headlines to slip through – to follow after the OPEC+ JMMC meeting this Thursday.

Oil jumps 4% on better sentiment and tighter Iran sanctions

Sanctions in play and WTI up $2.21 to $56.15

Sanctions in play and WTI up $2.21 to $56.15
Reports from Iran suggest leaders will scale back its commitments to the 2015 nuclear deal within hours.
That comes a short time after the US announced a fresh round of sanctions  and promises to do more. The aim is to bring Iran oil exports to zero.
Technically, even with the big jump today we’re still within the range of the two prior trading sessions. Beyond that, the trend towards consolidation has been ongoing for more than a month with oil locked in a $53-57 range.
That’s similar of the ‘box’ in the S&P 500 and suggests both could break out at the same time and could confirm one another.