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FT: Saudi Arabia is pushing to make a substantial cut in oil production when Opec meet

  
Analysis, Crude
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OPEC meet 5 and 6 March in Vienna, the Financial Times says Saudi Arabia  is asking producers including Russia for a production cut of an additional 1m barrels a day

FT citing five people familiar with the talks,
Under the proposal, Saudi Arabia would account for the bulk of the new 1m b/d cut
  •  Kuwait, the United Arab Emirates and Russia would split the rest
  • Deal not yet been agreed
  • Moscow still hesitant
This proposal is up from the 600k bpd proposal previously floated.
OPEC meet 5 and 6 March in Vienna, the Financial Times says Saudi Arabia  is asking producers including Russia for a production cut of an additional 1m barrels a day

OPEC’s Barkindo: We see global economy almost doubling by 2040

  
Analysis, Crude

When you can’t talk up the near-term outlook, you try and play the long game

Barkindo
  • Says that the “thirst for energy will continue to grow”
Oil prices are faring slightly better on the day after the fall yesterday, with WTI up by nearly 1% to $51.90 currently. I would say it is still early days to call for a major bounce, not when there is still the risk of global growth being further hampered by the virus outbreak.

Saudi Arabia energy minister: WSJ story on cuts of output is “absurd and utter nonsense”

  
Analysis, Crude
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WSJ report suggested a potential 300K cut.

Saudi Arabia’s energy minister Prince Abdulaziz is on the wires in reaction to an earlier Wall Street Journal article saying that they were mulling over a proposed 300K cut in output, says:
  • Media report on Saudi Arabia considering break from OPEC+ alliance “absurd and utter nonsense”
  • We will continue to act in a collective manner
  • Saudi Arabia is in continuous communication and dialogue with all  OPEC and OPEC+ partners
Crude oil futures are currently trading down $0.94 or -1.73% at $52.93. The low for the day reached $52.55. The high for the day was up at $53.86

OPEC+ close to dropping the idea of an emergency meeting – report

  
Analysis, Crude
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So much for that hope

OPEC+ is close to dropping the idea of an emergency meeting this month and will stick with March meeting dates, according to delegates cited by Bloomberg. They say the Saudis may still push for hte Feb meeting.
Oil has climbed this week for the first time since Jan 3…at least for now. The March contract just expired.
So much for that hope

IEA sees fall in Q1 oil demand, the first quarterly drop in more than a decade

  
Analysis, Crude
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IEA estimates Q1 oil demand to fall by 435k bpd year-on-year

Oil
  • Q2 pglobal oil demand set to grow by 1.2 mil bpd
  • Assuming that economic activity returns progressively to normal
  • Cuts 2020 oil demand growth forecast by 365k bpd to 825k bpd
The changes to the forecasts and estimates are due to the coronavirus outbreak impact as IEA sees the widespread shutdown of the Chinese economy weighing heavily on demand – more so than OPEC – but they estimate a quicker recovery in the coming quarters.
That said, the agency says that the impact of the coronavirus outbreak will be felt by the oil market throughout the year and it is “hard to be precise about the impact” now.
Back to the headline reading, IEA had previously forecast a growth of 800k bpd in Q1 compared to a year earlier but now expect a contraction of 435k bpd instead – the first contraction since the global financial crisis back in 2009.

Crude oil inventories for the current week 7.459M vs 3.200M estimate

  
Analysis, Crude

Department of Energy weekly inventory data

  • Crude oil 7.459M vs 3.2M estimate. The private data came in stronger at 6.0M last night
  • Cushing OK crude inventory 1.668K versus 1.068K last week
  • gasoline inventories -0.095M vs 0.650M estimate.  Private data came in at 1.1M
  • distillates inventory -2.013M vs -0.75M estimate.  Private data came in at -2.3M.
  • Refinery utilization 0.6% versus -0.4% estimate
  • crude oil implied demand 18912 versus 19036 last week
  • gasoline implied demand 9343.6 versus 9918.9 last week
  • distillates implied demand 5226.6 versus 5386.0 last week
The price of crude oil has dipped a little but still remains up $1.50 or 2.96% at $51.42

OPEC cuts Q1 oil demand growth estimate by 440k bpd on coronavirus outbreak

  
Analysis, Crude
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OPEC releases its latest report on the oil market

OPEC
  • 2020 oil demand growth outlook cut by 230k bpd to 0.99 mil bpd
  • Coronavirus outbreak adds to uncertainties for oil market this year
  • The situation needs continuous monitoring
  • To face oil surplus of 570k bpd in Q2
The downward revisions are not surprising as they don’t just see the virus having an impact on the oil market in Q1, but also for larger portions of the year.
This is in part why they are trying to push forward with the additional output cuts but so far we are still waiting on a response from Russia regarding the latest proposal.
The thing about Russia is that, they always play hard ball but eventually cave when it comes to OPEC+ executing new output cuts. However, that doesn’t mean they will necessarily contribute and the bulk of the responsibility will fall on Saudi Arabia instead.

The factors influencing oil right now

  
Analysis, Crude

Understanding the factors influencing oil

Understanding the factors influencing oil

Yesterday, I was speaking on CNBC Arabia about the factors influencing oil at the moment. Oil has been on a steady fall recently on demand concerns, but there are a number of factors influencing oil that it is good to be aware of. Here are five of the largest factors, so that you can get a handle on oil in a hurry.

  1. The first issue with oil is that the market is, or rather, can be easily oversupplied. OPEC+ have helped keep oil markets price supported through 2019 by agreeing to production cuts
  2. OPEC+ is waiting on Russia to see if they agree to the proposed 600K production cuts. Russia needs US crude to be at around $40 to balance their books, so they are not overly alarmed at current US crude prices around $50. However, Saudi need oil closer to the $80 mark, so they are incentivised to cut production. In fact production levels for January have been at historic low levels from OPEC suppliers
  3. Libya. The shutdown of ports in the East of Libya have really hit supply. Linya is producing around 180K barrels per day vs a normal production level of 1.2 million barrels per day. So, watch out. The Libyan crisis is currently supporting oil prices, so if the ports suddenly open then oil will fall sharply as they factor in the large inflows.
  4. Coronavirus demand issues. The longer and worse the coronavirus outbreak gets, the worse this is for oil prices. China is the world’s largest importer of oil at around 11 million barrels per day. The analysis that I have been reading puts China oil demand falling between 1-3 million barrels per day. So, that could be around a 20% fall in Chinese oil demand, possibly slightly more.
  5. The IEA and OPEC oil reports are both out this week. It will be interesting to see how they project oil demand being impacted by the coronavirus, so watch out for some potential oil wobbles as those headlines come out.

Ok folks, check the headlines as they come out, so that you can weigh them up against these factors. Trading oil is really like a puzzle at the moment, so just make sure you know how each piece is lining up before making your moves.

Russia is not supporting a deeper output OPEC+ cut – report

  
Analysis, Crude
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Reuters report

Russia is not supporting a deeper oil output cut and prefers and extension of the current pact, according to Reuters sources.
WTI briefly dipped below $50.50 on the headline.
Russia was grandstanding against the December cut before it fell in line. All that said, the only one who is really cutting is Saudi Arabia. The Russian ‘cut’ is the usual cold weather slowdown.
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