Monday, January 27, 2020

Solid crash course on global oil markets & trading

Of late, the global oil market has seen what can aptly be described as range-bound volatility. No matter what the bulls throw at it, movements of both Brent, the global proxy benchmark, and WTI, the main North American benchmark, have flattered to deceive when it comes to price spikes past $70 per barrel. 

Yet at same time, the price floor has largely held at $50 and barring a global slowdown, few are predicting a Q1 2016-esque slump below $30. Market variables are changing too, not least tweets from US President Donald Trump on oil prices and copious amounts of American light sweet crude flooding the market. 

In such a setting, should understanding the market, making calculated guesstimates on price direction and trading black gold tickle your fancy, be it via a position in the market or a spreadbet, then market commentator Simon Watkins' latest book – An Insider’s Guide To Trading The Global Oil Market – would be well worth your while. In a work of just under 360 pages, the author sums ups the runners and riders, speculators and chancers, players and detractors who have a profound impact on a sentiment driven commodity like crude oil. 

There's detailed analysis, fully illustrated charts linked to points made by the author and tips aplenty. The treatment of risk/reward management is great and Watkins has also taken the trouble of covering the history of the oil business in a concise fashion to give readers a sound understanding of key production centres, demand drivers and geopolitics. 

Recent developments in the China, Middle East, Russia and the US, and the cycle oil cartel OPEC finds itself trapped in, have been covered in some detail providing the essential padding to the outlined oil market history. 

Generic trading methodologies, strategies and cross-market opportunities deployed by proprietary traders around the world as outlined by Watkins make for an engaging narrative. Among the allied trades, the author's take on Saudi Aramco following its IPO, chimes with those in the short-sellers' camp, including this blogger, who note the various complications and lack of transparency associated with the so-called mother of all IPOs that promised so much internationally, but ended up a with mere single-digit percentage float on the domestic Saudi market. 

Overall, Watkins' impressive work cuts through market exaggerations designed to shift sentiment one way or another, and makes readers work towards developing their convictions while being cautious of manipulations, e.g. casual dropping of price rallies that lack legs, black swan events that are anything but, and risk premiums that barely last a trading week instead of having a tangible price supporting impact. 

Ultimately, as the author opines: "If the intricacies are understood, the oil market is a trader's nirvana; it offers far and away the most opportunities out of any other market for high returns." And to that effect, he's provided a very solid crash course that could serve both beginners and those with market exposure looking to brush up and refocus. 

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© Gaurav Sharma 2020. Photo: Front Cover - An Insider’s Guide To Trading The Global Oil Market  © ADVFN Books, 2019.

Monday, January 20, 2020

Summing up the geopolitics heavy last 4 weeks!

The end of the previous trading year and the start of the new one is usually a slow burner for crude  oil traders. However, the four or so weeks from Christmas Eve of 2019 all the way up to what's fast approaching late January of 2020, have turned out to be anything but!

As it transpired, skirmishes in Iraq between Iran-backed militia and US forces heightened Middle East tensions over Christmas. What then followed took the market by surprise. In the small hours of January 2, the New Year got its first geopolitical jolt, after a US airstrike killed Qasem Soleimani, an IranianGeneral of the country's Islamic Revolutionary Guard Corps, and commander of its Quds Force, a division primarily responsible for extraterritorial military and clandestine operations.

In the Oilholic's opinion, courtesy US President Donald Trump, it was the biggest targeted political killing in the region since that of another Iranian protégé - Lebanese Islamic Jihad Organization's founder and then Hezbollah's second-in-command ImadMughniyeh in 2008; a man widely thought to have masterminded the 1983 US embassy bombing in Beirut.

As speculators piled into the oil futures market with long calls, expecting the inevitable Iranian response, Tehran duly obliged via missile strikes on Iraqi bases housing US troops that it gave prior warning of and the attack caused no casualties. However, as has now been acknowledged, the Iranians mistakenly shot down a civilian airliner tragically killing 176 innocent people on board.

The phoney oil price rally also came and went as soon as Iran's phoney response to the US airstrike became evident. While there is no shortage of speculators, ample supplies in a crude market that has gotten used to living with a Middle East in flames has tempered any rash calls to the upside since.

Rising woes in Libya, Turkey's entry into an already messy civil war that's reached the gates of Tripoli and a subsequent force majeure of the country's oil exports that has followed in recent days, after the US-Iran episode, also offers such a case in point. The market is coping and the oil price is going to be kept honest courtesy ample supplies, especially of light sweet crude oil, as the Oilholic opined in a recent Rigzone column.

All things considered, 2020 could see Brent lurk in the $70-75 range, while the WTI could oscillate between $63 and $68, as yours truly noted, even if recent events have surely made for a very hectic four weeks for oil market observers. Let's leave it at that for now.

Away from all this, the Oilholic also had the pleasure of listing to Royal Dutch Shell's electric car driving Chief Financial Officer Jessica Uhl at a Reuters Breaking Views event in London on January 16. The oil giant's finance boss offered up some choice quotes on the evening, few of which are embedded here via yours truly's Twitter feed below (@The_Oilholic).
And that’s all for the moment folks! Keep reading, keep it ‘crude’!

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© Gaurav Sharma 2020. Photo: Oil pipeline © Cairn. 

Tuesday, December 24, 2019

Ten years of 'crude' blogging & a big thank you!

Its a day to say thanks and feel a tad nostalgic, as the Oilholic woke up this Christmas eve morning to the realization that today marks 10 years of this oil and gas market blog's appearance on cyberspace!

Boy does time fly! When yours took this blog live and put his first post up on December 24, 2009, Barack Obama had been in the White House for less than a year; Gordon Brown was still in Downing Street; the global economy was limping back from the financial crisis; the US shale revolution's impact hadn't been felt; OPEC had held its latest minister's meeting in Luanda, Angola instead of its secretariat in Vienna, Austria; and Brent and WTI futures closed at $76.31 and $78.05 per barrel respectively, with a premium in the latter's favour! That's a 10-year decline of $9.84 (-12.9%) for Brent and $17.5 (-22.42%) for WTI versus this European morning's prices in Asia.  

Back then, all this blog had was a handful of readers comprising of mutual acquaintances in the trading community who had been providing tips and invaluable feedback since 2007, when yours truly was working on concepts, and a trail site/domain. The subsequent blogging journey began on Christmas eve of 2009 when the Oilholic registered the www.oilholicssynonymous.com domain, and it has been quite a ride, and more, ever since. 


The blog underwent a complete template overhaul in 2011 as the readership started gaining traction. Well past its millionth pageview, it currently averages 12,000 reads a month. 

Well above average readership points are often brought about by posts on energy sector developments and events such as IPWeek, CERAWeek, OPEC and ADIPEC, where this blogger often takes speaking engagements at, resulting in monthly pageviews jumping above 100,000 reads a month. 

As in previous years, bulk of the readers who browse and read this blog in 2019 have come from the US, UK, Norway, Germany and China in that order, with American and British readers leading the pack by some distance. 

Many have logged in from some 127 countries week in, week out. So a massive thank you to all of you because without your readership, feedback and support this blog wouldn't be here. Alongside regular readers who find this blog via established routes, analytics also reveal the impact of Google, where many of you find your way to the Oilholic alongside LinkedIn, Twitter and Forbes.

What this blog has been about over the last 10 years is what it will be about in the future, carrying the Oilholic's analysis, thoughts, rants, musings and social media flags, about past events, developments and emerging scenarios in the sector, and the comments of fellow market experts one is able to interact with. 

It'll also continue to complement the Oilholic's analysis and media career, speaking circuit engagements, serve as a published clippings portfolio hub, broadcast commentary, work undertaken over the last 20 years (and counting), some favourite photographs and a selection of book reviews.

As the years go by, here's hoping this blog is (and will be) as much fun for those reading it as it is for the one writing it. So keep reading, keep it 'crude' and once again thank you for all your support.

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© Gaurav Sharma 2019. Photo: Screenshot of Oilholics Synonymous Report's homepage in 2010 © Gaurav Sharma.

Saturday, December 21, 2019

Key energy industry interviews of 2019

As the current oil and gas trading year approaches its end, here are some of the industry interviews conducted by The Oilholic over the course of 2019 with C-suite executives around the world. The list includes group CEOs and Chairmen of Emerson, Hunting, IndianOil, OMV and Wintershall Dea. Most, but not all, of the interviews were published either on Forbes or Rigzone

John Rudolph, President of Honeywell Process Solutions 

Luca Volta, Marine Fuels Venture Head at ExxonMobil

David Farr, Chairman and Chief Executive Officer of Emerson

John Markus Lervik, Chief Executive Officer and Cofounder of Cognite

David Gilmour, Head of BP Ventures

Andreas Thorsheim, Cofounder and CEO of Otovo

Karl Johnny Hersvik, Chief Executive Officer of Aker BP

Rainer Seele, Chief Executive Officer of OMV

Greg Scheu, Head of Group Service & (former) President - Americas region at ABB

Jim Johnson, Chief Executive Officer of Hunting Plc

Rusty Hutson, Founder and Chief Executive Officer of Diversified Gas and Oil 

Jason Urso, Chief Technology Officer at Honeywell Process Solutions

Sanjiv Singh, Chairman of IndianOil Corporation

Mario Mehren, Chief Executive Officer of Wintershall Dea

Here's to many more C-Suite chats in 2020. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2019.

Thursday, December 19, 2019

Post OPEC quips & LatAm, Shale outlook

The Oilholic returned from the OPEC+ ministers’ summit in Vienna, Austria to a crazy few weeks of crude chatter and of course umpteen discussions on the Saudi Aramco IPO.

Here are yours truly's thoughts on the final communiqué from OPEC via Forbes, and another take on the Aramco IPO via the same publication plus a ReachX podcast touching on the issue of the company's valuation kerfuffle.  

Away from it all, two pieces of research caught one's eye this month. Starting with the first of two, rating agency Moody's reckons 2020 will be a stable year for the Latin American oil and gas sector. While, global economic environment and trade disputes could become a concern to Latin America's commodity exporters, including those in the business of black gold and natural gas, Moody's opined that many regional players have indeed improved their capital structures. 

"Business conditions will vary in 2020, contributing to stable overall conditions. A shift toward exploration and production favours credit quality for Brazil's national oil company Petrobras, but 2020 production appears stable at best in Mexico as investment stalls," says Moody's Senior Vice President Nymia Almeida.

Mexico investment momentum in oil and gas is negative for 2020 as national oil company PEMEX has limited ability to increase investments and deliver on production and reserves targets, Almeida added. 

Away from Latin America, Rystad Energy predicted that even with potentially lower prices, the production outlook for North American shale "appears robust" in the years ahead.

In Norway-based analysis firm's base-case price scenario - that assumes a WTI price at $55 per barrel in 2019; $54/bbl in 2020; $54/bbl in 2021 and $57/bbl in 2022 - would see North American light tight oil supply will reach 11.6 million barrels per day (bpd) by 2022. 

This implies a compound annual growth rate (CAGR) of 10% from 2019 to 2022. In a price scenario with the WTI oil price remaining flat at $45 per barrel, supply of the same would plateau at 10.1 million bpd towards 2022.

"The flat development of US light tight oil production is also possible in lower price scenarios, but we would likely see an initial period of multi-quarter production decline, with output stabilising at a lower level," said Mladá Passos, product manager of Rystad Energy's Shale Upstream Analysis team. Plenty to ponder about as 2020 approaches, but that's all for the moment folks. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2019. Photo: Oil exploration site in Oman © Royal Dutch Shell. 

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