and how it can help us see when Saudi (MBS) and Putin bury the hatchet, which will boost OIL
Archives of “Crude” category
rssRussia says that oil prices are very unpleasant, but not a catastrophe for the country
Comments by the Kremlin
- There is no price war between Russia and Saudi Arabia
- Our relations are good and doesn’t think anyone should intervene
- Says Russia has safety buffer against unfavourable oil prices
I would argue that you have to read between the lines with this one. The fact that the OPEC+ joint technical committee meeting was cancelled goes to show that both sides aren’t exactly on speaking terms right now, so believe what you will.
In any case, their official stance still shows no backing down just yet.
Top oil trader Vitol says the world might run out of available commercial storage in a couple of months
The world’s largest oil trader, Vitol, shares their view on the oil market
- Global oil demand could fall by more than 10% as lockdowns spread across Europe
- Drop would be much higher if lockdowns start to take hold in the US
- But that is currently not in their base case scenario
- But if it does happen, “you can get as bearish as you like” on oil prices
- Might run out of available commercial storage in a couple of months
- Important now how much China buys into strategic stocks
A fair take on the current situation and on the commercial storage part, Vitol is assuming current OPEC production remains i.e. Saudi and Russia continue to do battle. Just some food for thought as we continue to look at how the virus situation develops across the world.
New highs for crude as Pres. Trump announces the US will fill up strategic reserves
High extends to $33.87
The price of crude oil has moved up from about $31.90 to a new session high of $33.87 after Pres. Trump announces that the US will fill up the strategic oil reserves given the low oil prices. That is the good news. The not so good/bullish news is that the earlier high for the day was at $33.86 just $0.01 below the new high level.
The contract currently trades at $33.33.
A move above the $33.87 level will be needed to give buyers more confidence for further gains
OPEC cuts 2020 global oil demand growth forecast by 920K bpd
The latest from OPEC
In other times that would be a shocking drop but now it sounds behind the curve. Obviously demand is going to fall much more in a global pandemic.
- Saudi Arabia pumped 9.68 mbpd in Feb
- Cuts non-OEPC supply estimate by 490K bpd to 1.76 mbpd
WTI crude oil is down $1.18 to $33.17 today and is just off session lows. There’s been no reaction to this news.
EIA cuts forecast for 2020 world oil demand but still sees increase
OPEC and the EIA both see demand growth this year
- EIA cuts forecast for 2020 world oil demand by 660K bpd but still sees 0.37 mbpd y/y increase
- Raises 2021 world oil demand growth by 210K bpd, now sees 1.73 mbpd increase
Forecasting oil demand ahead of a pandemic is a fool’s game. Heck, forecasting oil demand at the best of times is a fool’s game.
Oil: Theater of war
A look at the competitors in the oil price war
Disposition
So we have now an all-out oil price war between Saudi Arabia and Russia.
Russia is planning to increase its oil supplies undoing the December output cut once its term ends in March. It is assuring that its fund reserves are ready to absorb the damage from lower oil prices for as long as up to 10 years (with oil prices at $25-30 per barrel).
Saudi Arabia, in response, prepares to increase its own supplies for up to 12mln barrels per day. It also offers its crude under huge discounts, especially in Europe, to push away Russia from its core market.
The opposition doesn’t end here, however: the situation is actually a triangle of relationship rather than a Russia-Saudi Arabia standoff. The US is involved heavily, but indirectly, although it may be not that obvious: recently they just commented that they were hoping to see the oil market in an “orderly” condition.
Let’s observe the starting points of each protagonist here.
The US
Strengths
- ·The strongest world economy gives the US the highest strategic resilience to withstand any economic damage in the long-term.
- ·The “newly-founded” domestic shale oil production satisfies a big part of domestic oil demand and enables oil exports.
Weaknesses
- ·The strongest world economy pushes the internal domestic oil demand chronically higher than the domestic oil production capacities and hence obliges the country to import oil from other countries.
- ·With the exception of just a few, the US shale oil producers’ break even price for a barrel of oil is well above the current price – that means, they are losing the game now and will most likely stay out as drilling new wells is not profitable.
Once “hated” Gold trading the richest to the former “darling” oil in decades.
Reminder: OPEC meeting begins today
Will Russia agree to the proposal to reduce output by more than 1 mil bpd?
That is the key question as all eyes turn towards Vienna over the next two days. As things stand, the expectation is that OPEC members – namely Saudi Arabia – will be pushing for output cuts of 1 mil bpd at the very least.
As mentioned yesterday, the usual case is that Russia always plays hard ball in the lead up to the meeting but then they always cave when it comes to making a decision.
So far, the market reaction is telling something similar despite murmurs of Russia rejecting the proposal of a 1.2 mil bpd output cut yesterday.
OPEC+ meetings reportedly to go ahead as planned on 5-6 March in Vienna
Reuters reports, citing two OPEC sources on the matter
I don’t think anyone would expect the meeting to be postponed. The plunge in oil prices will be inevitable if they don’t come up with anything this week.