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Pres. Trump excited about $26 oil

  
Analysis, Crude

Its better than $17.29 (July contract low) but still on it’s bact

Pres. Trump is tweeting:
Its better than $17.29 (July contract low) but still on it's bact

The prices off the $17 .29 low area for the July contract, but at $26.33, the price is still way below your high levels at $62.95 and also below breakeven levels for lots of oil producers.

The President is also weighing in on the Tesla situation saying:
  • California should let Tesla and @elonmusk open the plant now. It can be done fast and safely

Saudi Arabia to reduce crude oil production by an extra voluntary amount of 1 mil bpd in June

  
Analysis, Crude

This will bring the total production cut to 4.8 mil bpd from April levels

This will bring the total production cut to 4.8 mil bpd from April levels
The Saudi energy ministry says that with this move, it is aiming to encourage other OPEC+ participants and other global producers to comply with the agreed output cuts. Adding that the additional 1 mil bpd of voluntary cuts is to support stability of the oil market.

This will bring the kingdom’s total production volume for June to 7.492 mil bpd.

The news is helping to give oil prices a substantial lift ahead of North American trading, with WTI crude jumping from $24.05 to $24.80 currently.

Update: WTI crude now up 2% to $25.30.

ICYMI: JP Morgan forecast for $100 oil within 2 years

  
Analysis, Crude

Some love for the oil bulls from JPM – this from a research note this week

  • We see oil going to $100 within two years
  • the near term, clearly, it’s very tough
  • oil price that should sit somewhere between $35 and $40 by the end of the year
  • two to three year view, we see a huge supply response, a lot of oil coming off the market, and we are very bullish on the long term viewpoint
  • “I’d expect as we go to the second half of this year, as we see demand bottom, and we see the OPEC cuts coming into play and potentially deeper cuts 

Goldman Sachs on oil – expects a strong recovery in demand

  
Analysis, Crude

Comments overnight ICYMI from Goldman’s global head of commodities research Currie

Expects a strong recovery in demand except for business travel:
  • “Before we used to have these internal meetings and things of that nature, and I think this is going to be way more Zoom-oriented, other types of substitutes”
Which has implications for airline travel:
  • “Look at the routes that the airlines are planning when they come back, they’re not going to be at the same level that they were previously.”
Moving on …
  • We believe demand will exhibit a V-shaped recovery
Oil supply could take a little longer to get back online as wells need to come back online, companies need to increase spending:
  • supply will exhibit an L-shaped recovery
Putting the two together:
  • could mean demand rises above supply as early as June 1
  • while demand returns to normal it will be from a base with less business travel
(That last remark I read as demand will not return to normal but to a lower new normal)
Comments overnight ICYMI from Goldman's global head of commodities research Currie

DOE crude oil inventories 4590K versus 8800K estimate

  
Analysis, Crude

DOE crude oil inventories

The crude oil inventory showed a lesson expected build in inventories.  Gasoline inventories at a greater than expected drawdown, while distillates showed a greater than expected build.
The numbers are showing:
  • crude oil inventories 4590K vs 8800K estimate
  • gasoline inventories -3158K vs 1000K estimate
  • distillates 9518K vs 3000K estimate
  • Cushing 2068K vs 3637K last week
  • US refinery utilization 0.9% versus 0.4% estimate and 2.0% last week
  • crude oil implied demand 16956 versus 16118 last week
  • gasoline implied demand 7195.1 versus 6764.3 last week
  • distillates implied demand 4058.3 versus 4489.6 last week
Overall better demand this week and lower builds/supply.
WTI crude oil futures are trading around $24.00 or -2.4%. The high price reached $26.08 while the low extended to $22.58 and volatile trading.
FYI the private data from the API show the following last night:
API data

Russia deputy energy minister: No reasons for oil to fall to or below zero now

  
Analysis, Crude

Comments by Russia deputy energy minister, Pavel Sorokin

OPEC+
  • We can see first signs of recovery in the oil market
  • Return to pre-virus oil demand will take a long time
  • Nobody is interested in breaking OPEC+ deal now
  • Full compliance may be difficult for some countries
  • Violation of OPEC+ deal would bring new collapse in oil
The fall to negative prices in the May contract was brought about by a confluence of black swan events working together. It was pretty much the perfect storm that will probably never be repeated in our lifetime ever again.
Anyway, it will be ironic if Russia is the one to not fully comply to the OPEC+ deal in the near future and bring about added concerns about the oil market.
For now, oil prices are continuing to stabilise and recover with WTI crude up 3.5% on the day to $25.40 currently after a monstrous surge higher in overnight trading.
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