Analys

Price reaction to OPEC+ deal reveals the state of the oil market

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4 år sedan

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22 juli, 2021

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Mobeen Tahir, Associate Director, Research, WisdomTree provides his view on the price reaction to OPEC+ deal and what this means for the state of the oil market.

“Arguably, broader risk aversion in markets at the time of the OPEC+ deal announcement somewhat obscures the direct impact of the group’s decision on oil prices. What is clear, however, is that the deal has eliminated the risk of any additional tightness that may have been occurred had the ongoing no-deal scenario persisted for much longer.

“Under the deal, OPEC+ have agreed to increase oil supply by 0.4 million barrels per day (mb/d) each month from August to December adding a total of 2mb/d by the end of the year. Remaining production cuts of around 3.8mb/d will be brought back online gradually by September 2022. This was expected and already priced in by markets before the last round of talks ended in a stalemate at the start of July. What is more important, and perhaps unsurprising still, is that United Arab Emirates (UAE), Iraq, Kuwait, Saudi Arabia, and Russia have been granted a higher ‘basis’ to calculate their pandemic supply cuts from. In other words, these countries have been given higher supply allowances to reward them for all the investment they have made in expanding their capacities. This deal settles the discord within the group, for now, and raises the prospect of an additional 1.6mb/d of oil ultimately flowing into the market due to the increased allowances.

“The OPEC+ deal reveals three key aspects of the nature of oil markets. First, there is (maybe) just enough harmony in the group to avoid any cracks to widen and for countries to cut loose and break their supply agreements – an upside risk that has surfaced following the stalemate. Second, markets are not expecting demand growth to outpace supply growth, or else a positive reaction to the decision would have ensued. And third, backwardated oil futures curves – which indicate supply tightness in the short term – also potentially signal a lack of tightness in the future.

“The third point above suggests that markets share our view that OPEC+ holds the cards for controlling oil prices and has sufficient spare capacity to satiate any additional demand growth. According to the International Energy Agency, total oil demand growth globally is expected to be 5.4mb/d in 2021 and another 3mb/d in 2022 – bringing total demand back to pre-pandemic levels. Some of this growth expected to happen in 2021 has already taken place in the first half of the year. On the supply side, production in the United States is likely to increase by 1.6mb/d this year, and OPEC+ intends to add at least 5.8mb/d by September next year. An additional 1.6mb/d from the latest deal and a further 1.4mb/d could absorb any unexpected surge in demand – a relatively low probability outcome as the world reels from Covid aftershocks.

“Our base case, therefore, is that oil prices are likely to face headwinds for significant further growth from here onwards. OPEC+ has acquired additional power to keep the market balanced and, in turn, control prices. And with countries like the UAE not getting penalised for additional capital expenditure in the oil industry, a precedent is being set which gives producers an incentive to increase supply further in the future. Given the fundamentals of demand and supply, an upside scenario for oil is now unlikely to be triggered by a broader risk assets rally or shortages in supply. It will have to come from a meaningful upside surprise in demand growth.”

Relaterade ämnen:oil opec wisdomtree

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OPEC+ is holding good cards and a steady course

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Stronger inventory build than consensus, diesel demand notable

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1 dag sedan

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21 februari, 2025

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Yesterday’s US DOE report revealed an increase of 4.6 million barrels in US crude oil inventories for the week ending February 14. This build was slightly higher than the API’s forecast of +3.3 million barrels and compared with a consensus estimate of +3.5 million barrels. As of this week, total US crude inventories stand at 432.5 million barrels – ish 3% below the five-year average for this time of year.

Ole R. Hvalbye, Analyst Commodities, SEB

In addition, gasoline inventories saw a slight decrease of 0.2 million barrels, now about 1% below the five-year average. Diesel inventories decreased by 2.1 million barrels, marking a 12% drop from the five-year average for this period.

Refinery utilization averaged 84.9% of operable capacity, a slight decrease from the previous week. Refinery inputs averaged 15.4 million barrels per day, down by 15 thousand barrels per day from the prior week. Gasoline production decreased to an average of 9.2 million barrels per day, while diesel production increased to 4.7 million barrels per day.

Total products supplied (implied demand) over the last four-week period averaged 20.4 million barrels per day, reflecting a 3.7% increase compared to the same period in 2024. Specifically, motor gasoline demand averaged 8.4 million barrels per day, up by 0.4% year-on-year, and diesel demand averaged 4.3 million barrels per day, showing a strong 14.2% increase compared to last year. Jet fuel demand also rose by 4.3% compared to the same period in 2024.

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Analys

Higher on confidence OPEC+ won’t lift production. Taking little notice of Trump sledgehammer to global free trade

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3 dagar sedan

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19 februari, 2025

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Ticking higher on confidence that OPEC+ won’t lift production in April. Brent crude gained 0.8% yesterday with a close of USD 75.84/b. This morning it is gaining another 0.7% to USD 76.3/b. Signals the latest days that OPEC+ is considering a delay to its planned production increase in April and the following months is probably the most important reason. But we would be surprised if that wasn’t fully anticipated and discounted in the oil price already. News this morning that there are ”green shots” to be seen in the Chinese property market is macro-positive, but industrial metals are not moving. It is naturally to be concerned about the global economic outlook as Donald Trump takes a sledgehammer smashing away at the existing global ”free-trade structure” with signals of 25% tariffs on car imports to the US. The oil price takes little notice of this today though.

Bjarne Schieldrop, Chief analyst commodities, SEB

Kazakhstan CPC crude flows possibly down 30% for months due to damaged CPC pumping station. The Brent price has been in steady decline since mid-January but seems to have found some support around the USD 74/b mark, the low point from Thursday last week. Technically it is inching above the 50dma today with 200dma above at USD 77.64/b. Oil flowing from Kazakhstan on the CPC line may be reduced by 30% until the Krapotkinskaya oil pumping station is repaired. That may take several months says Russia’s Novak. This probably helps to add support to Brent crude today.

The Brent crude 1mth contract with 50dma, 100dma, 200dma and RSI. Nothing on the horizon at the moment which makes us expect any imminent break above USD 80/b

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Analys

Brent looks to US production costs. Taking little notice of Trump-tariffs and Ukraine peace-dealing

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5 dagar sedan

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17 februari, 2025

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Brent crude hardly moved last week taking little notice of neither tariffs nor Ukraine peace-dealing. Brent crude traded up 0.1% last week to USD 74.74/b trading in a range of USD 74.06 – 77.29/b. Fluctuations through the week may have been driven by varying signals from the Putin-Trump peace negotiations over Ukraine. This morning Brent is up 0.4% to USD 75/b. Gain is possibly due to news that a Caspian pipeline pumping station has been hit by a drone with reduced CPC (Kazaksthan) oil flows as a result.

Brent front-month contract rock solid around the USD 75/b mark. The Brent crude price level of around USD 75/b hardly moved an inch week on week. Fear that Trump-tariffs will hurt global economic growth and oil demand growth. No impact. Possibility that a peace deal over Ukraine will lead to increased exports of oil from Russia. No impact. On the latter. Russian oil production at 9 mb/band versus a more normal 10 mb/d and comparably lower exports is NOT due to sanctions by the EU and the US. Russia is part of OPEC+, and its production is aligned with Saudi Arabia at 9 mb/d and the agreement Russia has made with Saudi Arabia and OPEC+ under the Declaration of Cooperation (DoC). Though exports of Russian crude and products has been hampered a little by the new Biden-sanctions on 10 January, but that effect is probably fading by the day as oil flows have a tendency to seep through the sanction barriers over time. A sharp decline in time-spreads is probably a sign of that.

Longer-dated prices zoom in on US cost break-evens with 5yr WTI at USD 63/b and Brent at USD 68-b. Argus reported on Friday that a Kansas City Fed survey last month indicated an average of USD 62/b for average drilling and oil production in the US to be profitable. That is down from USD 64/b last year. In comparison the 5-year (60mth) WTI contract is trading at USD 62.8/b. Right at that level. The survey response also stated that an oil price of sub-USD 70/b won’t be enough over time for the US oil industry to make sufficient profits with decline capex over time with sub-USD 70/b prices. But for now, the WTI 5yr is trading at USD 62.8/b and the Brent crude 5-yr is trading at USD 67.7/b.

Volatility comes in waves. Brent crude 30dma annualized volatility.