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OPEC cuts Q1 oil demand forecast by 1 mbpd

  
Analysis, Crude

The latest from the OPEC monthly report

  • Sees demand in 2020 down 9.77 mbpd vs 9.75 mbpd in prior monthly forecast
  • Sees 2021 demand up 5.9 mbpd vs 6.25 mbpd prior
  • Lower 2021 demand due to uncertainty around covid-19, especially in H1. Also reflects mild weather
  • Recent vaccine news is upside risk
Oil has given back much of its gains in the past hour and is now trading higher by just 18-cents to $46.76.
The latest from the OPEC monthly report

Weekend news on oil – Iran pipeline fire, Saudi port explosion

  
Analysis, Crude

There was a spillage and fire after a pipeline carrying crude oil to Iran’s second-largest refinery ruptured on Sunday.

A landslide was blamed (info via Reuters).
Also, via AP
  • A ship explosion off Saudi Arabia’s port city of Jiddah on the Red Sea (a crucial port and distribution centre for its oil trade).
  • Saudi Arabia’s state-run media did not acknowledge the explosion.

Oil’s ability to shrug off bad news is incredible

  
Analysis, Crude

Huge build in inventories ignored

You would be forgiven for not being impressed by oil lately. After all, WTI is trading just 4.5% above the August high. The move pales in comparison to some other commodities and it hasn’t done much in the past two weeks.
oil
What makes the move so impressive to me is just how much bad news the market has endured:
  • Libya coming back online and pumping 1.2m bpd
  • OPEC+ not delaying the taper and instead added 500k bpd/month through March
  • A raging resurgence in the pandemic sparking new restrictions throughout the developed world
  • Consistent inventory builds including today’s in the US, which was the second-largest on record
Today’s EIA report showed a build of 15.189m barrels compared to a draw of 1.035m expected. There were also surprise builds in gasoline and distillates.
That’s the kind of thing that could break a market. Initially that looked like it might be the case as crude fell to $44.96 from $46.05 in seconds. However it quickly steadied and in 80 minutes had recovered the gain. It later slipped on soft risk appetite in the US but is back to $45.75.
One of the reasons for the build was a large wave of imports and relatively small exports. That suggests a timing issue could be at play and we could see a quick reversal.
That said, this is only one in a series of bearish inventory numbers and oil continues to hold up. It’s still going to be a rough few months and the 5mbpd in spare OPEC production looms but there is lots to like in the medium-to-long term.

Crude oil inventories for December 4 week 15.189M vs -1.035M estimate

  
Analysis, Crude

Department of Energy inventory data for the week of December 4, 2020

  • Crude oil inventories surprise build of 15.189M vs. draw of -1.035M estimate
  • Gasoline inventories build 4.221M vs 2.000M estimate
  • Distillates inventories build 5.222M vs 0.900M estimate
  • OK Cushing crude inventories draw -1.364M vs -0.317M last week
Huge builds in the crude, gasoline and distillates. The price of crude oil is trading down $0.05 or -0.09% at $45.57. The high for the day reached $46.24.  The low extended to $45.33

Oil nears August levels as OPEC angst grows

  
Analysis, Crude

Oil down 1.5%

Oil down 1.5%
The OPEC+ decision was supposed to be today but trouble arose yesterday with the UAE grandstanding about the lack of full compliance and payback cuts. It’s also unclear if Russia is on board.
As a result, the meeting was moved to Thursday and oil prices have come under pressure.
Support is at the August high of $43.78. The low so far today was $44.12. Technically, it looks like a retest of an old break.
The problem in my mind is that demand in the front few months is still deeply depressed but the curve is essentially flat through 2021, in part because so much oil will be coming out of storage.

OECD cuts 2021 global forecast, warns governments to maintain support

  
Analysis, Crude

OECD sees a gradual and uneven global recovery over the next two years

OECD
  • 2021 global growth forecast 4.2% (previously 5.0%)
  • 2021 US growth forecast 3.2% (previously 4.0%)
  • 2021 Eurozone growth forecast 3.6% (previously 5.1%)
  • 2021 UK growth forecast 4.2% (previously 7.6%)

OECD chief economist, Laurence Boone, comments on the report:

“Policy still has a lot to do. If public health or fiscal policy falter then we would see a loss of confidence and a much more depressing outlook.”

As per the usual, take these forecasts with a pinch of salt as they are merely sentiment indicators rather than predictors of what is to happen next.
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