Följ oss

Analys

OPEC+ won’t kill the goose that lays the golden egg

Publicerat

den

SEB - analysbrev på råvaror

Lots of talk about an increasingly tight oil market. And yes, the oil price will move higher as a result of this and most likely move towards USD 100/b. Tensions and flareups in the Middle East is little threat to oil supply and will be more like catalysts driving the oil price higher on the back of a fundamentally bullish market. I.e. flareups will be more like releasing factors. But OPEC+ will for sure produce more if needed as it has no interest in killing the goose (global economy) that lays the golden egg (oil demand growth). We’ll probably get verbal intervention by OPEC+ with ”.. more supply in H2” quite quickly when oil price moves closer to USD 100/b and that will likely subdue the bullishness. OPEC+ in full control of the oil market probably means an oil price ranging from USD 70/b to USD 100/b with an average of around USD 85/b. Just like last year.

Bjarne Schieldrop, Chief analyst commodities, SEB
Bjarne Schieldrop, Chief analyst commodities, SEB

Brent crude continues to trade around USD 90/b awaiting catalysts like further inventory declines or Mid East flareups. Brent crude ydy traded in a range of USD 88.78 – 91.1/b before settling at USD 90.38/b. Trading activity ydy seems like it was much about getting comfortable with 90-level. Is it too high? Is there still more upside etc. But in the end it settled above the 90-line. This morning it has traded consistently above the line without making any kind of great leap higher.

Netanyahu made it clear that Rafah will be attacked. Israel ydy pulled some troops out of Khan Younis in Gaza and that calmed nerves in the region a tiny bit. But it seems to be all about tactical preparations rather than an indication of a defuse of the situation. Ydy evening Benjamin Netanyahu in Israel made it clear that a date for an assault on Rafah indeed has been set despite Biden’s efforts to prevent him doing so. Article in FT on this today. So tension in Israel/Gaza looks set to rise in not too long. The market is also still awaiting Iran’s response to the bombing of its consulate in Damascus one week ago. There is of course no oil production in Israel/Gaza and not much in Syria, Lebanon or Yemen either. The effects on the oil market from tensions and flareups in these countries are first and foremost that they work as catalysts for the oil price to move higher in an oil market which is fundamentally bullish. Deficit and falling oil inventories is the fundamental reason for why the oil price is moving higher and for why it is at USD 90/b today. There is also the long connecting string of:

[Iran-Iraq-Syria/Yemen/Lebanon/Gaza – Israel – US]

which creates a remote risk that oil supply in the Middle East potentially could be at risk in the end when turmoil is flaring in the middle of this connecting string. This always creates discomfort in the oil market. But we see little risk premium for a scenario where oil supply is really hurt in the end as neither Iran nor the US wants to end up in such a situation.

Tight market but OPEC+ will for sure produce more if needed to prevent global economy getting hurt. There  is increasing talk about the oil market getting very tight in H2-24 and that the oil price could shoot higher unless OPEC+ is producing more. But of course OPEC+ will indeed produce more. The health of the global economy is essential for OPEC+. Healthy oil demand growth is like the goose that lays the golden egg for them. In no way do they want to kill it with too high oil prices. Brent crude averaged USD 82.2/b last year with a high of USD 98/b. So far this year it has averaged USD 82.6/b. SEB’s forecast is USD 85/b for the average year with a high of USD 100/b. We think that a repetition of last year with respect to oil prices is great for OPEC+ and fully acceptable for the global economy and thus will not hinder a solid oil demand growth which OPEC+ needs. Nothing would make OPEC+ more happy than to produce at a normal level and still being able to get USD 85/b. Brent crude will head yet higher because OPEC+ continues to hold back supply Q2-24 resulting in declining inventories and thus higher prices. But when the oil price is nearing USD 100/b we expect verbal intervention from the group with statements like ”… more supply in H2-24” and that will probably dampen bullish prices.

Not only does OPEC+ want to produce at a normal level. It also needs to produce at a normal level. Because at some point in time in the future there will be a situation sooner or later where they will have to cut again. And unless they are back to normal production at that time they won’t be in a position to cut again.

So OPEC+ won’t kill the goose that lays the golden egg. They won’t allow the oil price to stay too high for too long. I.e. USD 100/b or higher. They will produce more in H2-24 if needed to prevent too high oil prices and they have the reserve capacity to do it.

Data today: US monthly oil market report (STEO) with forecast for US crude and liquids production at 18:00 CET

Analys

Tightening fundamentals – bullish inventories from DOE

Publicerat

den

SEB - analysbrev på råvaror

The latest weekly report from the US DOE showed a substantial drawdown across key petroleum categories, adding more upside potential to the fundamental picture.

Ole R. Hvalbye, Analyst Commodities, SEB
Ole R. Hvalbye, Analyst Commodities, SEB

Commercial crude inventories (excl. SPR) fell by 5.8 million barrels, bringing total inventories down to 415.1 million barrels. Now sitting 11% below the five-year seasonal norm and placed in the lowest 2015-2022 range (see picture below).

Product inventories also tightened further last week. Gasoline inventories declined by 2.1 million barrels, with reductions seen in both finished gasoline and blending components. Current gasoline levels are about 3% below the five-year average for this time of year.

Among products, the most notable move came in diesel, where inventories dropped by almost 4.1 million barrels, deepening the deficit to around 20% below seasonal norms – continuing to underscore the persistent supply tightness in diesel markets.

The only area of inventory growth was in propane/propylene, which posted a significant 5.1-million-barrel build and now stands 9% above the five-year average.

Total commercial petroleum inventories (crude plus refined products) declined by 4.2 million barrels on the week, reinforcing the overall tightening of US crude and products.

US DOE, inventories, change in million barrels per week
US crude inventories excl. SPR in million barrels
Fortsätt läsa

Analys

Bombs to ”ceasefire” in hours – Brent below $70

Publicerat

den

SEB - analysbrev på råvaror

A classic case of “buy the rumor, sell the news” played out in oil markets, as Brent crude has dropped sharply – down nearly USD 10 per barrel since yesterday evening – following Iran’s retaliatory strike on a U.S. air base in Qatar. The immediate reaction was: “That was it?” The strike followed a carefully calibrated, non-escalatory playbook, avoiding direct threats to energy infrastructure or disruption of shipping through the Strait of Hormuz – thus calming worst-case fears.

Ole R. Hvalbye, Analyst Commodities, SEB
Ole R. Hvalbye, Analyst Commodities, SEB

After Monday morning’s sharp spike to USD 81.4 per barrel, triggered by the U.S. bombing of Iranian nuclear facilities, oil prices drifted sideways in anticipation of a potential Iranian response. That response came with advance warning and caused limited physical damage. Early this morning, both the U.S. President and Iranian state media announced a ceasefire, effectively placing a lid on the immediate conflict risk – at least for now.

As a result, Brent crude has now fallen by a total of USD 12 from Monday’s peak, currently trading around USD 69 per barrel.

Looking beyond geopolitics, the market will now shift its focus to the upcoming OPEC+ meeting in early July. Saudi Arabia’s decision to increase output earlier this year – despite falling prices – has drawn renewed attention considering recent developments. Some suggest this was a response to U.S. pressure to offset potential Iranian supply losses.

However, consensus is that the move was driven more by internal OPEC+ dynamics. After years of curbing production to support prices, Riyadh had grown frustrated with quota-busting by several members (notably Kazakhstan). With Saudi Arabia cutting up to 2 million barrels per day – roughly 2% of global supply – returns were diminishing, and the risk of losing market share was rising. The production increase is widely seen as an effort to reassert leadership and restore discipline within the group.

That said, the FT recently stated that, the Saudis remain wary of past missteps. In 2018, Riyadh ramped up output at Trump’s request ahead of Iran sanctions, only to see prices collapse when the U.S. granted broad waivers – triggering oversupply. Officials have reportedly made it clear they don’t intend to repeat that mistake.

The recent visit by President Trump to Saudi Arabia, which included agreements on AI, defense, and nuclear cooperation, suggests a broader strategic alignment. This has fueled speculation about a quiet “pump-for-politics” deal behind recent production moves.

Looking ahead, oil prices have now retraced the entire rally sparked by the June 13 Israel–Iran escalation. This retreat provides more political and policy space for both the U.S. and Saudi Arabia. Specifically, it makes it easier for Riyadh to scale back its three recent production hikes of 411,000 barrels each, potentially returning to more moderate increases of 137,000 barrels for August and September.

In short: with no major loss of Iranian supply to the market, OPEC+ – led by Saudi Arabia – no longer needs to compensate for a disruption that hasn’t materialized, especially not to please the U.S. at the cost of its own market strategy. As the Saudis themselves have signaled, they are unlikely to repeat previous mistakes.

Conclusion: With Brent now in the high USD 60s, buying oil looks fundamentally justified. The geopolitical premium has deflated, but tensions between Israel and Iran remain unresolved – and the risk of missteps and renewed escalation still lingers. In fact, even this morning, reports have emerged of renewed missile fire despite the declared “truce.” The path forward may be calmer – but it is far from stable.

Fortsätt läsa

Analys

A muted price reaction. Market looks relaxed, but it is still on edge waiting for what Iran will do

Publicerat

den

SEB - analysbrev på råvaror

Brent crossed the 80-line this morning but quickly fell back assigning limited probability for Iran choosing to close the Strait of Hormuz. Brent traded in a range of USD 70.56 – 79.04/b last week as the market fluctuated between ”Iran wants a deal” and ”US is about to attack Iran”. At the end of the week though, Donald Trump managed to convince markets (and probably also Iran) that he would make a decision within two weeks. I.e. no imminent attack. Previously when when he has talked about ”making a decision within two weeks” he has often ended up doing nothing in the end. The oil market relaxed as a result and the week ended at USD 77.01/b which is just USD 6/b above the year to date average of USD 71/b.

Bjarne Schieldrop, Chief analyst commodities, SEB
Bjarne Schieldrop, Chief analyst commodities, SEB

Brent jumped to USD 81.4/b this morning, the highest since mid-January, but then quickly fell back to a current price of USD 78.2/b which is only up 1.5% versus the close on Friday. As such the market is pricing a fairly low probability that Iran will actually close the Strait of Hormuz. Probably because it will hurt Iranian oil exports as well as the global oil market.

It was however all smoke and mirrors. Deception. The US attacked Iran on Saturday. The attack involved 125 warplanes, submarines and surface warships and 14 bunker buster bombs were dropped on Iranian nuclear sites including Fordow, Natanz and Isfahan. In response the Iranian Parliament voted in support of closing the Strait of Hormuz where some 17 mb of crude and products is transported to the global market every day plus significant volumes of LNG. This is however merely an advise to the Supreme leader Ayatollah Ali Khamenei and the Supreme National Security Council which sits with the final and actual decision.

No supply of oil is lost yet. It is about the risk of Iran closing the Strait of Hormuz or not. So far not a single drop of oil supply has been lost to the global market. The price at the moment is all about the assessed risk of loss of supply. Will Iran choose to choke of the Strait of Hormuz or not? That is the big question. It would be painful for US consumers, for Donald Trump’s voter base, for the global economy but also for Iran and its population which relies on oil exports and income from selling oil out of that Strait as well. As such it is not a no-brainer choice for Iran to close the Strait for oil exports. And looking at the il price this morning it is clear that the oil market doesn’t assign a very high probability of it happening. It is however probably well within the capability of Iran to close the Strait off with rockets, mines, air-drones and possibly sea-drones. Just look at how Ukraine has been able to control and damage the Russian Black Sea fleet.

What to do about the highly enriched uranium which has gone missing? While the US and Israel can celebrate their destruction of Iranian nuclear facilities they are also scratching their heads over what to do with the lost Iranian nuclear material. Iran had 408 kg of highly enriched uranium (IAEA). Almost weapons grade. Enough for some 10 nuclear warheads. It seems to have been transported out of Fordow before the attack this weekend. 

The market is still on edge. USD 80-something/b seems sensible while we wait. The oil market reaction to this weekend’s events is very muted so far. The market is still on edge awaiting what Iran will do. Because Iran will do something. But what and when? An oil price of 80-something seems like a sensible level until something do happen.

Fortsätt läsa

Centaur

Guldcentralen

Fokus

Annons

Gratis uppdateringar om råvarumarknaden

*

Populära