Wednesday, August 12, 2020

Joining Citi Private Bank

It has been a fantastic 'crude' journey for the Oilholic in the energy market and this blog has been with yours truly every step of the way for over a decade. Thank you all for your support. While long may that continue, commentary here would be a little tempered and slightly irregular as this blogger has taken up a Vice President / Lead Analyst's position at Citi Private Bank. 

Things won't be coming to a close here, but whatever appears on this blog would be in a private capacity only. That also applies to any commentary published here in the past prior to Aug 1, 2020. That's all for the moment folks! Keep reading, keep it 'crude'!

© Gaurav Sharma 2020.

Sunday, July 19, 2020

Hosting ADIPEC Energy Dialogues

Over the last few months, yours truly has been participating in the recording of the Abu Dhabi International Petroleum Exhibition and Conference (ADIPEC) Energy Dialogues series. Some of the recordings are now up. Here is a selection of them, also available via ADIPEC's YouTube channel and the event's website.

Recent conversations have included informative discussions with Morag Watson, SVP Digital Science & Engineering at BP, Jeff Zindel, Vice President and General Manager at Honeywell Connected Enterprise, Cybersecurity and Thomas Gangl, Chief Downstream Operations Officer, OMV.

Morag Watson, SVP Digital Science & Engineering at BP



Jeff Zindel, Vice President and General Manager at Honeywell Connected Enterprise, Cybersecurity



Thomas Gangl, Chief Downstream Operations Officer, OMV


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© Gaurav Sharma 2020. Video © ADIPEC / DMGEvents, UAE

Monday, June 15, 2020

End of 'voluntary' Saudi cuts, no Covid-19 end in sight

In the lead up to the OPEC+ summit on June 6, oil benchmarks continued to rise toward $40 per barrel and subsequently went beyond. Brent even capped $42 levels briefly as OPEC+ decided to predictably rollover ongoing crude production cuts of 9.7 million barrels per day (bpd) - scheduled to end on July 1 - by another month. 

All of it was accompanied by the common din of crude oil demand returning, underpinned by hopes of China reverting to its average importation rate of around 14 million bpd by end-2020. Such an assumption is fanciful in the Oilholic’s humble opinion, as a semblance of normalcy, especially in the aviation sector, is unlikely before Q1 2021. But even that assumption was further punctured by Saudi Arabia withdrawing its additional 'voluntary' cuts of 1 million bpd in June, atop what they were already cutting as part of the OPEC+ agreement. 

To quote Saudi Oil Minister Prince Abdulaziz bin Salman: "The voluntary cut has served its purpose and we are moving on. A good chunk of what we will increase in July will go into domestic consumption."

Be that as it may be, that's bearish joy for those with short positions who can now also count on rising sentiment in favour of a second wave of the Coronavirus or Covid-19 hammering crude oil demand, with rising cases in the U.S. and as well as a fresh outbreak in China. So, oil futures have duly retreated from $40 levels.

However, here's what this blogger doesn't get – how can it be all about a possible second wave, when the initial pandemic is far from over! Just look at the official and anecdotal data coming out of India and Brazil. 

And while European pandemic hotspots might be cooling down, the initial threat is far from over. A crude market recovery remains a long, long way off. The Oilholic reckons it will be Q1 2021 before we get into a proper recovery mode and can think of a nuanced reversal in market fortunes. By that argument near-term volatility is likely be in $30-40 range, unless Covid-19 situation escalates. To assume the only way is up from $40 is pretty daft. That's all for the moment folks! Keep reading, keep it crude!

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© Gaurav Sharma 2020. Image by Omni Matryx from Pixabay

Saturday, June 06, 2020

'e-OPEC' agrees 9.7mbpd cut extension by a month

We here again, albeit via webcam! As widely anticipated, oil producers' group OPEC has agreed to recommend a roll over its existing 9.7 million barrels per day (bpd) production cut at its latest meeting. 
Here's a glimpse of the new e-OPEC (click to enlarge). 

Two sources said all members were onboard, with one respondent emphatically declaring there "will be a 9.7 million bpd not ifs or buts." However, the was precious little word on the so-called cheaters. Within OPEC that would be Iraq and Nigeria, and beyond it Kazakhstan. There's plenty of doubt over what to do with Mexico's insistence that it cannot reduce its production level. 

However, Russia and Saudi Arabia, who want non-OPEC and OPEC cheaters brought to heel are so far said to be in agreement with a move to extend the cuts - instituted in April in the wake of the coronavirus pandemic - by a month. Non-OPEC countries are only just joining the meeting, so the market will have further word on that at time of stunted demand and expectations of a dire 2020

Monitoring is expected to be stepped up with OPEC's monitoring committee or the Joint Ministerial Monitoring Committee (JMMC) opting to meet every month from June 18 onwards. The next OPEC meeting has been scheduled for Nov 30, followed by an OPEC+ meeting on Dec 1. Ultimately, an exit strategy remains missing and that problem will resurface soon rather than later

Ahead of the weekend's OPEC+ meeting, oil futures jumped significantly, with the Brent August contract rising well above $40 per barrel, and WTI July contract coming within tantalizing distance of the said level. There's something incredibly premature about this and the said levels - at least in this blogger's opinion - have arrived at least a month early as one noted in recent opinion column

Away from the goings-on at OPEC, here are few of the Oilholic's recent Forbes missives on the world of oil and gas equities:

Thursday, May 14, 2020

Big Oil quarterly earnings in the Covid-19 age

The first Big Oil quarterly earnings season in the age of the coronavirus or Covid-19 global pandemic has gone revealing profit slumps, capex and opex cuts, job losses and much upheaval. Selected reports on the financials by the Oilholic are listed below, with links:
  • Profits Slump 67% At BP But Oil Major Maintains Dividend Despite Coronavirus Downturn, Apr 28
  • ExxonMobil Follows BP In Maintaining Dividend But Shell Cuts As Oil Crash Bites, Apr 30
  • Shell Cuts Dividend By 65% On ‘Prolonged’ Oil Market Uncertainty, Apr 30 
  • Oil Giant Total Maintains Dividend Despite ‘Exceptional’ 35% Plunge In Profits, May 5
  • Oil Major Equinor Suspends 2020 Guidance Following 51% Slump In Earnings, May 7
  • Saudi Aramco Keeps Record $18.75 Billion Dividend Payment Intact Despite Profits Slump, May 12
Some key themes to emerge were: 

(1) Universal profit slumps, excepting Chevron which bucked wider quarterly trends, 
(2) Around $60 billion in cost cuts instituted by the biggest 20 IOCs, and 
(3) Shell's first dividend cut since the Second World War. 

A more detailed summary for Forbes on what we can learn from Q1 2020 figures for is here. But that's all for the moment folks. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2020.

Sunday, April 26, 2020

Last contango in Harris (County)

The crude trading week that was gave the market a day that will live in infamy. For on Monday, April 20, 2020, the soon-to-expire WTI May contract – lost all its value, slid to zero and then went into negative prices for the first time in trading history eventually settling at -$37.63 per barrel down over 300%. 

Blame a supply glut that Harris County, Texas, US – home to America's oil and gas capital of Houston – is only too aware of, or blame the dire demand declines caused by the coronavirus/Covid-19 lockdowns around the world, or blame money managers holding paper barrel or e-barrels desperately looking to dump their holdings at the last minute with very few takers – whatever the reason might be, outrageously sensational the development most certainly was! 

Expiring crude futures contracts often have a run on them in a climate of depressed demand that we happen to be in but April 20 was something the Oilholic never imagined he would ever blog about. Yet here we are! The very next day – April 21 – the contract did return to positive turf after all the headlines had been written. So is it a 'switch the lights out' moment for the industry? Not quite. Is it an unmitigated disaster for Harris County and wider industry sentiment in North America – most certainly so. 

That's because near-term demand is not looking pretty, and the Oilholic sees no prospect of a return to normalcy at least until the end of July. That too might be contingent upon the global community getting some sort of a handle on the global pandemic. Implications in barrel terms could likely be a Q2 2020 demand slump of at least 20 million barrels per day (bpd) and might well be as much as 30-35 million bpd.

For upcoming and established US exploration and production plays gradually discovering lucrative East Asian markets of light, sweet crude and national headline production levels of 12.75 million bpd – the current situation is a crushing but inevitable blow. 

Chats with Wall Street and City of London forecasters – virtual ones of course (via Skype, WhatsApp, did anyone mention Zoom) – and with several industry contacts from Harris County, Texas to Denver, Colorado suggest come 2021 US production is likely to fall to ~11 million bpd. But a long-term market has been established for competitively priced light, sweet barrels currently available at a rather cheap price provided you can find a place to stack or store the barrels. 

In fact, the lowest spot price the Oilholic has encountered is just south of $2 per barrel as shutdowns and idle rigs become the order of the day. Only problem is storage – which contrary to popular belief, and as verified by satellite imagery – hasn't quite run out US onshore but is on the verge of being leased and spoken for. 

And it is costing dear on a floating basis too, something that is unlikely to change as traders gear up for contango plays! Simple formula - get your hands on crude cargo from anywhere between $2 to $18, ride out the coronavirus downturn, pin hopes on a Q4 2020 to Q1 2021 recovery and make a tidy profit!

Hypothetically, if December is the cut-off point for such bets right now, then WTI December contract is around $29 per barrel while WTI June is trading around $17. That gives one of the widest contango structure of $12 and a 70.6% discount to six-month forward contracts for anyone with hands on US light sweet crude; means to hold on to it; and flog it off six months later on margins not seen since 2009

It is doubtful the returns are likely to be of the magnitude raked in by Gunvor in the immediate recovery that followed the 2008-09 financial crisis but they could be substantial. Many on Wall Street are calling it the 'super-contango' but the Oilholic prefers something else. Opportunities and differentials like this do not come along often – so yours truly thinks calling it the 'Last contago in Harris' is way more colourful. That's all for the moment folks! Stay safe! Keep reading, keep it ‘crude’! 

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© Gaurav Sharma 2020. Photo: View of Downtown Houston, Texas, US © Gaurav Sharma, May 2018.

Friday, April 17, 2020

OPEC+ G20 = 'Crude' potpourri + V-shaped recovery

There have been umpteen developments over the last fortnight in the crude saga of oil producers scrambling to curtail production in light of the unprecedented drop in demand triggered by the coronavirus or Covid-19 outbreak.

That oil prices would have fallen regardless was a given, but the current desperate market situation was largely of Saudi Arabia and Russia's own making following the collapse of OPEC+ on March 6. 

Marking a reversal, frantic talks over the Easter weekend saw Moscow and Riyadh underpin a 9.7 million barrels per day (bpd) production cut, with feverish diplomacy by U.S. President Donald Trump and the promise of 1.5 million bpd in cuts by G20 oil producers serving as an accompaniment. Overall, the crude potpourri smelt better than it actually was. 

For the expected near-term oil demand decline is likely to be two to three times the production cut level. The deal itself doesn't look rock solid. As the Oilholic discussed with Mary-Ann Russon of the BBC, around 2.5 million bpd of cuts have been promised by Russia, an OPEC+ participant with a very poor record of compliance with the OPEC+ framework. 

The Saudis meanwhile would be cutting 2.5 million bpd from an inflated level of 11 million bpd. Prior to OPEC+'s December meeting, their production stood at 9.744 million bpd, which means in actual fact their compromise is closer to 1.25 million bpd on average. 

Yet for all of this, if oil demand is dire, any supply cut is only likely to have a very limited impact. We are flying, consuming and driving less (despite 99c/gallon prices in some US states) - so if we aren't going out that much, it won't matter one bit what OPEC+ does or doesn't. 


The deal is supposed to run from May to July and it won't avert short-term pain. It's come too late to rescue April, and it's too little for May and June. Hopes are pinned on a V-shaped recovery in oil prices come the middle of July. But how steep that 'V' might be is the question, and in the Oilholic's opinion it'll be steeper than where we are. 

As for The Donald, here is this blogger's take in a discussion with Marco Werman on PRI / BBC joint radio production The World. Phenomenal diplomacy it was by the President but more hot air was generated than tangible results. 

Additionally, the Oilholic also discussed various other market permutations, facets and shenanigans plus direction of oil and gas stocks, fuel prices, and several other energy topics with a host of industry colleagues including Richard Hunter of Interactive InvestorFreya Cole of BBC, Juliet Mann of CGTN, Victoria Scholar of IG Markets, Auskar Surbakti of TRT World, Sean Evers of Gulf Intelligence, Garima Gayatri of Energy Dias and scribbled half a dozen Forbes missives in what can only be described as the most manic of all manic fortnights for the oil market.

Final thoughts - WTI still looks like it'll hit mid-to-late-teens and continue to lurk below $20 per barrel  till early summer because dire demands means dire prices! That's about it for the moment folks! Stay safe, keep reading, keep it 'crude'!


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© Gaurav Sharma 2020. Photo I: Oilfield in Oman © Shell. Photo II: Gaurav Sharma on the BBC, TRT World and CGTN broadcasts © Broadcasters as mentioned, April 2020. 

Saturday, April 04, 2020

A catalogue of ‘crude’ missives on oil market turmoil

In the nine days that have lapsed since yours truly last wrote a blog post, the crude oil market has gone crude and cruder, peppered with barmy ideas, suggestions of strange alliances, tariffs, and of course tweets. For all of that, two things haven't materially changed – crude demand collapse continues as the coronavirus or Covid-19 pandemic spreads, and oversupply in the face of demand destruction is already here.

So here are few of The Oilholic’s missives via Forbes and Rigzone tackling various market slants between March 26-Apr 2:

  • With whole countries in lockdown mode, forecasters now reckon a fifth of global crude demand could be wiped out - Forbes, Mar 26, 2020
  • The Oilholic's thoughts on why a resurrection of OPEC+ would be too little, too late for the oil market - Forbes, Mar 27, 2020.
  • Oil futures are in record contango - Forbes, Mar 29,2020
  • Oil benchmarks ended Q1 2020 around 66% lower and lack of storage space is becoming apparent - Forbes, Mar 31, 2020
  • US shale explorer Whiting Petroleum becomes the first casualty of the current oil price slump as it files for bankruptcy - Forbes Apr 1, 2020
  • Moody's announces series of predictable negative outlooks on major oil and gas companies - Forbes, Apr 1, 2020
  • How Saudi belligerence has pushed VLCC rates to comedic highs - Rigzone, Apr 1, 2020
  • And finally, how a Donald Trump tweet sent oil futures soaring but the gains are unlikely to last - Forbes, Apr 2, 2020

And that's about it for the moment folks! Stay safe, keep reading, keep it 'crude'!

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© Gaurav Sharma 2020. 

Wednesday, March 25, 2020

Coronavirus lockdowns & crude oversupply

What a week it has been for humankind in general, let alone the commodities and equities market. Since the Oilholic arrived back to London from Houston on March 14, in a matter of days whole towns, cities, metropolitan areas, regions and countries have gone into lockdown mode around the world, with the coronavirus or Covid-19 having spread to over 100 countries.

After China, where the outbreak originated at the start of the year, now Iran, Italy, Spain and South Korea are in its grip. Heightened alarm about the spread of the coronavirus has seen European Union nations, Canada and the US close borders. Whole airlines are grounded, restaurants, pubs, bars and shops are shut, and workers in many sectors in several nations have been advised to work from home with restrictions slapped on venturing out.

Under similar circumstances and restrictions imposed in London (effective March 23) comes this missive from the Oilholic's living room. The last few weeks have alternated between how much of a demand slump the coronavirus would cause to what impact the collapse of OPEC+ would have over the near-term.

Such conjecture misses the wider point. Events have overtaken OPEC+ and are now largely beyond its control, and what we are witnessing is not just a demand slump but a total near-term collapse. Most oil demand forecasters are now predicting a 2020 demand shrinkage of around 155,000 barrels per day (bpd) instead of demand growth. Under the circumstances, that might be too optimistic.

From where the Oilholic sits, we could see a shrinkage of 250,000 bpd instead of a projected demand growth of 1.2 million bpd prior to the outbreak. Consider this - of the big five crude importers, China, which imports on average a whopping 14 million bpd, has had a lousy first quarter, and is likely to have disappointing or muted second and third quarters. Japan and South Korea are likely to import less, as will the US.

India, the one economy many were pinning their hopes, as a demand driver for 2020 prior to the coronavirus outbreak has also just gone into a lockdown effective Tuesday (March 24) for 21 days.

The country imports an average of 5 million bpd. So in three weeks alone, India won't be needing around ~ 100 million barrels with the negative impact spread over parts of the first and second quarters. Away from the big five, OECD demand remains as low as ever and is likely to head lower on temporary lockdowns from Poland to Australia.

And in the face of this demand crisis, is the issue of oversupply that has arisen in the wake of the collapse of the OPEC+ with Saudi Arabia, Russia and other OPEC and non-OPEC producers vowing to pump more. For now, after posting declines of 20-30% week-over-week, Brent and WTI futures have settled in the $20-30 range following US stimulus measures to combat the coronavirus.

That may well prove to be a temporary reprieve after the extent of the supply glut, somewhere in the region of 10 million bpd in unwanted crude oil, becomes clearer. As for what it means for oil and gas companies large and small - here is the Oilholic's take via Forbes, as players bunker down for $20 oil prices and prepare to write of 2020. That's all for the moment folks! Stay safe! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2020. Photo © Royal Dutch Shell, Oman.

Saturday, March 14, 2020

On Tankers, Travel Bans & Turbulence

The Oilholic is about to wrap up a week in Houston, Texas, gauging the oil market mood and related industry matters in the age of the coronavirus and the collapse of OPEC+, penning his thoughts by the banks of a rather calm Buffalo Bayou. 

Following on from the carnage of an oil price war, in the time yours truly has been in America's oil and gas capital, US President Donald Trump has announced a travel ban from Europe to the US; several countries are in lock-down mode or restricting access to foreigners; hoteliers, airliners, restaurateurs are all gearing up for a massive hit and with general gloom lurking in the air along with the virus - the equity and oil markets are down. 

In fact, in this blogger's latest weekly oil price assessment, Brent and WTI front month contracts closed down a massive 25.23% and 23.14% on today (Friday, March 13) on the Friday before (March 6). In over ten years of running this blog, that is the biggest weekly drop the Oilholic has logged and given that weekly assessments are supposed to wipe out daily volatility; the figures are telling. 

And the contango plays have begun yet again coming to the aid of a beleaguered oil shipping industry that must surely think Christmas has come early. More so because Saudi Aramco's bid to flood the market with its crude has sent VLCC tanker rates rising further, in some cases by as much as 678% when it comes to the lucrative Middle East to Asia maritime routes, as yours truly noted in his latest Forbes missive

Many in Houston expect an imminent prompt price decline to $25 per barrel, with limited upside as Russia and Saudi Arabia continue their oil price and market share war at a time of lacklustre demand. General consensus is that when oil hits $20, OPEC will come its senses. However, it doesn't look like that right now with other Gulf producers including the United Arab Emirates and Kuwait upping production in step with Saudi Arabia. 

And while Saudi discounts are the talk of H-Town trading circles, Trump's plans to purchase "American made crude-oil" for the US Strategic Petroleum Reserve (SPR) is providing yet more chatter. The SPR holds 713.5 million barrels at four primary oil storage sites. 

According to survey data, that level is currently at 635 million. So even if Trump goes for the maximum effect, the reserve can take another 78.5 million. The "American made" caveat means it could take that much primarily US light crude spread over the next 100-120 days from next week. 

While such a volume is not negligible, how much of a difference it will make is anyone's guess. Supply side is as complicated as ever and so is the demand side until the full impact of the virus is clearer. This turbulence will last a while and might rock most of 2020 at the very least in the opinion of many. And on that worrying note, its time for the flight home to London! Q1 has been a write-off; let's see what Q2 brings, stay strong, stay safe.

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© Gaurav Sharma 2020. Photo: Buffalo Bayou river, Houston, US © Gaurav Sharma, Friday March 13, 2020

Tuesday, March 10, 2020

View on a 'crude' few days from Houston

The Oilholic is glad to be back in Houston, Texas, US for yet another visit. However, in many ways the latest outing marks several first instances. It is this blogger's first instance of arriving in America's oil and gas capital right after an OPEC summit, the first immediately following a mammoth oil price crash, and the first when several events yours truly was planning on attending, including IHS CERAWeek have been cancelled due to the coronavirus outbreak that is wrecking the global economy. 

Yours truly promised some considered viewpoints 'to follow' while scrambling out of Vienna, to get here via London following the collapse of OPEC+, and here they are - thoughts on why $30 oil prices could be the short-term norm, and in fact $20 could follow via Forbes, thoughts on the shocking but inevitable collapse of OPEC+ via Rigzone, and why the recovery since Monday's (March 9) oil price slump is not a profound change to where the market stands, again via Forbes

Interspersed will penning thoughts for publications, the Oilholic met some familiar trading contacts in H-Town (you all know who you are), and met two new crude souls via mutual contacts too. Most seem surprised by the level of Aramco's discounts for April cargoes, and opined that they were three times over their expectations. 

The Saudis certainly mean business, and what was a crisis of demand following the coronavirus outbreak that has crippled China; has Iran, Italy and South Korea in its grip; and has seen emergency protocols being activated from California, US to Hokkaido, Japan now has a new dimension. It is now a crisis of demand coupled with a supply glut as OPEC and non-OPEC producers tough it out in a race to the bottom of the barrel. That's all from Houston, for the moment folks! More soon. For now, keep reading! Keep it 'crude'!

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© Gaurav Sharma 2020. Photo: Downtown Houston, Texas, US © Gaurav Sharma, March 10, 2020.

Friday, March 06, 2020

OPEC+ talks collapse; oil futures tank

The Oilholic had to leave OPEC HQ prior to the conclusion of a rather fractious OPEC+ meeting which resulted in no agreement being reached among OPEC and its non-OPEC partners. Following are the key takeaways, from Vienna Airport:

  • Russia blocked OPEC efforts aimed at deepening ongoing OPEC+ cuts by 1.5 million barrels per day (bpd) raising the output cut level to 3.2 million bpd to the end of 2020.
  • Stalemate means current level of cuts are set to expire as of April 1, 2020.
  • Russian Oil Minister Alexander Novak even refused name/set date for next OPEC+ meeting; technical committee to meet on March 18.
  • Senior OPEC sources tell this blogger “There is no plan B”.
  • Oil benchmarks slump by as much as 8% in the immediate aftermath of the development and trading down by ~10% at the time of writing; Brent/WTI front-month contract at levels last seen in August 2016, and recorded largest intraday drop since the financial crisis. 

More considered viewpoints/analysis to follow once yours truly has arrived in Houston. Keep reading, keep it ‘crude’! 

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© Gaurav Sharma 2020.

OPEC+ in waiting mode as Russia plays hardball

Overnight (March 5) OPEC ministers met and proposed a deepening of existing oil production cuts by 1.5 million barrels per day (bpd) to their Russia-led OPEC+ partners in an effort to calm the oil market following the coronavirus outbreak and its devastating impact on the global economy.

While the original 'deepening of cuts' proposal was set to last until end-June 2020, OPEC heavyweights met yet again late yesterday evening and announced the proposal would be extended to the end of 2020. 

The burden of 1.5 million bpd, would be shared as 1 million bpd and 0.5 million bpd between OPEC and non-OPEC players respectively. From a headline perspective, if approved the market would be looking at 3.2 million bpd of OPEC+ barrels being taken out of the global supply pool. 

With that the ball went into the Russian court, and that's where it has been since well into today (March 6). In that time, Russian Oil Minister Alexander Novak has gone and returned from Moscow, and an OPEC+ closed-door meeting scheduled to start at 9:30 CET, has yet to get going 14:20 CET!

And the Oilholic has putting his scenarios to colleagues in the broadcast media. 

In one scenario, Russia could say 'nyet' and you'd see bearish headwinds engulf oil futures and driving the price down to $30 per barrel. 

In another scenario, the mammoth cut would proceed providing only temporary relief to oil prices given the full extent of the coronavirus' demand destruction is yet to be clear. Although, Wall Street is belatedly, finally coming to terms with the magnitude of the destruction having ditched its complacency.

Finally, often the favourite colour at these OPEC meetings based on the Oilholic's past experience is grey. OPEC+ could emerge and offer a good old fashioned figures fudge involving OPEC cuts with the support of the Russians, and other non-OPEC players, with very few barrels to show for it. This too will either provide negligible or short-lived support. 

All of this bottles down to one thing - hardly anyone has an accurate handle on where oil demand is going, and the Oilholic believes there will be shrinkage on an annualised basis. Were that to be the case, a 'crude' logic applies - oil supply cuts never really solve a crisis of demand. It's where crude market presently is. OPEC can improve its odds via a cut but can do little more!

And on that note its time to leave Vienna for London, and then on to Houston, all the while keeping an eye on events here. But that's all for the moment folks. Keep reading, keep it 'crude'!

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© Gaurav Sharma 2020.

Thursday, March 05, 2020

Events overtaking OPEC as 1mbpd+ cut deepening is touted

After a meeting that went long into the night, OPEC+ is in for another hectic few days of haggling as it works out how to respond to the demand slump being caused by the coronavirus outbreak. 

OPEC+ technical committee's recommendation was for an expansion of its ongoing cuts of 1.2 million barrels per day (bpd) by 600,000 bpd.

But before the evening was done last night, a number as high as 1-1.2million bpd was being touted around, something that has held firm for much of this (Mar 5) morning and afternoon. Quite frankly, events have overtaken OPEC and demand forecasters are shooting blind at the moment, as the Oilholic noted via Forbes at IPWeek

But given the global proportions of the coronavirus spread, potential for $30 per barrel prices and demand growth shrinkage, Wall Street is finally waking up to the magnitude of the demand destruction that could happen. Here's yours truly's latest Forbes take on the subject

Lets see how the day unfolds. But for a deepening of that magnitude Saudi Arabia's headline production will have to drop below ~9 million bpd; and should that happen it'll be a bit of whopper facilitated by Saudi Crown Prince and Powerbroker-in-chief Mohammed Bin Salman! Keep reading, keep it 'crude'! 

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© Gaurav Sharma 2020. Photo: Ministerial Limos arrive at OPEC Secretariat in Vienna, Austria © Gaurav Sharma, Mar 5, 2020. 

Wednesday, March 04, 2020

Crude arrival in Vienna in the age of Coronavirus

The Oilholic has arrived in Vienna for the 178th 'Extraordinary' meeting of OPEC Ministers, only to be told that analysts and journalists will not be allowed into the Secretariat to mitigate chances of the spread of the coronavirus.

It seems the conference and its goings-on would be 'live streamed', and all of us would be moved to the confines of a meeting room at the Palais Hansen Kempinski with no media briefings and contact with oil ministers. Still old friends and diehards have turned for some outdoor coffee and cookies outside OPEC HQ.
 And here's the agenda for the next few days:
That's all for the moment folks! More from Vienna soon; but in the interim, keep reading, keep it 'crude'!

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To email: gaurav.sharma@oilholicssynonymous.com

© Gaurav Sharma 2020. 

Friday, February 28, 2020

A right royal crude market hammering


Coronavirus jitters have delivered a right royal hammering to the crude oil market, with the pace of bearish blows picking up considerably over the last 48 hours. Both major benchmarks are now over 25% below their 2020 peak achieved in the wake of the US-Iran skirmish at the turn of the new trading year. 

Key issue in finding a price floor stems from the fact that many, in fact most, crude demand forecasters are shooting blind, as the Oilholic wrote on Forbes.com. The local viral outbreak in China soon became a regional epidemic, and is now – in the view of some – a global pandemic in a matter of weeks. Complete dataset of the virus' economic impact will be trickling in soon, and there is market conjecture around that the global economy could be heading for a recession. 

Were that to be the case, and the fact that the virus has reached 50 countries, could result in crude demand destruction on an unprecedented scale, as yours truly via on Rigzone. So where from here? No one really knows, and unless OPEC+ provides temporary reprieve via a production at its next meeting scheduled for March 5-6, price floor would be hard to pin down. We could see benchmarks tumbling to as low as $30 per barrel; something that has indeed happened in the not too distant past. 

For now retail, travel, airline and energy stocks continue to take a hammering. In fact, the energy sector is now down 34% from 52-week closing high, while both Brent and WTI futures look likely to post their worst weeks in recent memory (last seen between December 2008 and January 2009 at the height of the global financial crisis). 

That was also the verdict of many yours truly interacted at the recently concluded International Petroleum Week in London. The event itself looked like it fell victim to the coronavirus as understandably Chinese and indeed many overseas delegates stayed away. 

Only major energy CEOs in attendance were those of BP and Vitol, and most attendees were pretty pessimistic about the oil price direction. Nonetheless, dialogues on energy transition over the course of three days proved to be very interesting as the sector continues its attempt at a low-carbon future. That's all for the moment folks! Keep reading, keep it 'crude'!

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© Gaurav Sharma 2020. Graphs 1 & 2: Brent & WTI futures price movement 3M to Feb 27, 2020.

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. 

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For comments or for professional queries, please email: gaurav.sharma@oilholicssynonymous.com

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