Thursday, July 10, 2025
On OPEC's higher output, no peak demand & no access
Tuesday, July 08, 2025
Vienna bound ahead of OPEC seminar
As the Oilholic heads out there for a business trip, while sitting and musing at London's Heathrow airport before the flight, one cannot but help notice that oil benchmarks are on the up.
That's despite OPEC+'s decision to up production by another half a million plus barrels. The group has effectively unwound nearly 90% of the so-called "voluntary" cuts it brought in back in 2022. Conventional market wisdom would suggest that oil futures would head lower on the development but they haven't.
That's down to three key reasons. They include: (1) an expectation that the summer driving season in Northern Hemisphere in general, and the US in particular, would absorb the additional barrels, (2) an uptick in attacks on cargoes in the Red Sea by Houthi rebels providing an element of risk, and (3) a belief that quota busting within OPEC+ ranks means many of the additional barrels are not all that additional at all.
Regardless of where we head to in the very near-term, there is likely to be a surplus and relatively weaker prices as the end of the year approaches. It sets up an interesting second half of the trading year, one, that as things stand, the market bears are likely to win bar another major geopolitical flare-up or a macroeconomic event.
Well that's all for now folks. More musing from Vienna soon. Keep reading, keep it here, keep it 'crude'!
Sunday, July 06, 2025
Do sub $60 oil prices beckon in H2 2025?
The second half of the current crude oil trading year was ushered in by a larger-than-expected output hike by OPEC+ over the weekend, just ahead of the first week's trades in Asia. The market was largely pricing in a 411,000 bpd hike like the previous month, but got a whopping 548,000 bpd uptick instead.
The latest addition effectively unwinds nearly 90% of the "voluntary" OPEC+ cuts in place since 2022. Here is the Oilholic's take on it via a column for Forbes. Unmistakably, this is a very bearish development. But it is also a statement of intent that OPEC is more than willing to take the fight to non-OPEC producers in a bid for a higher market share.
Of course, non-OPEC production - especially that of the US - continues to go from strength-to-strength, at least for now, until production hedges unwind in the next 12 to 18 months. Until then it might well be a buyers' market with likely lower, even sub $60 per barrel Brent prices in a glut-ridden market.
And speaking of the US, here is yours truly's latest Energy Connects column on how that record high US production has effectively reset the global energy market's risk premiums, as recent events in the Middle East have demonstrated.The said events, i.e. the Israel-Iran conflict and the bombing of Iran's nuclear facilities by the US, were the subject of The Oilholic's most recent appearance on TRT World's Round Table programme. Escalating tensions brought home long-held market anxieties - about energy cargoes in the Strait being disrupted as well as higher risk premiums - to the fore once again.
Together with fellow guests on the programme, yours truly discussed why the closure of the Strait would be an act of self-harm for Iran, why Tehran simply won't (and didn't) do it, and ultimately why oil prices failed to hold on to the gains following a cessation of hostilities, courtesy of a well-supplied market and lacklustre demand growth.
Here's an upload of the broadcast via TRT World's YouTube stream. Have a listen in if interested. Well that's all for the moment folks! More musings to follow soon. Keep reading, keep it here, keep it 'crude'!
Wednesday, June 25, 2025
Oil market fundamentals return with aplomb
Monday, June 16, 2025
A crude view from Abu Dhabi as oil price spike cools
As the Oilholic hopped across from Doha to Abu Dhabi on Monday it became evident that a further (read dramatic) spike in oil prices was not going to materialize.
It was helped in no small part by a report in the Wall Street Journal claiming that the Iranians - battered by precision Israeli bombing that began on Friday - were keen to get back to the negotiating table to end hostilities and resume discussions over their nuclear program.
It meant the Brent futures rally slowed quite significantly with the global proxy benchmark sliding below $75 per barrel instead of heading toward $80-levels. The report was met with some scepticism but it needn't have been.
In fact, informed sources both in Qatar as well as the UAE tell yours truly that Tehran is asking its Arab intermediaries to broker a cooling down of the daily barrage of attacks with much more fervor than the story suggests, provided the US doesn't join Israel in its campaign against Iran.
Traders took the cue from that, much to the consternation of market bulls. That's because were market sentiment to switch from "Israel is now attacking Iran's oil facilities" back to the negotiating table, normal market fundamentals would start applying, and that would mean even $70 levels would not be worth holding on to.
More musings to follow soon folks. Keep reading, keep it here, keep it 'crude'!
Sunday, June 15, 2025
State of play ahead of heading out to the Middle East
Tuesday, June 10, 2025
OPEC+, uptick in crude prices & more
For crude traders, the month of June began exactly the way May did - with another 411,000 bpd production hike by OPEC+.
The move was almost entirely priced in by the global market. And if anything else, prices actually rose a bit to clawback the ground lost in the wake of the Trump Tariffs kerfuffle in April.
Overall, the crude price - using Brent as a benchmark - is still down by double digits on last year.
Of course, there are different opinions out there in the market, but respectfully the Oilholic sees little reason to be overtly bullish on oil prices as things stand.
Here's yours truly's Forbes post on OPEC's move and its wider implications with another hike - most likely - coming in for August from the producers' group.
All things considered, with the hedges of US shale players not rolling off for another six months in many cases (and as high as 18 months in the case of some), this blogger expects the market in 2025 to be in surplus.
Furthermore, as The Oilholic noted in an interview with Asharq Bloomberg Business News last week, this isn't just about OPEC+ versus US shale production.This then does beg the age-old question (again) - what about investment in oil and gas in the current market and macroeconomic climate? We're in retreat from the Covid-years of frowning upon oil and gas investments to somewhat of a panic on the need for it to ensure security of supply in the energy transition era.
According to the IEF, around $740 billion a year is needed in investments to the end of the current decade assuming a global demand figure north of 100 million bpd. But in 2024, we didn't even cap $600 billion worth of oil and gas investments. So is the industry investing enough? It's what yours truly asked in his latest Energy Connects column (available here).
Well that's all for the moment folks! More musings to follow soon. Keep reading, keep it here, keep it 'crude'!
Wednesday, May 14, 2025
What oil price would Trump want for US consumers?
US President Donald Trump makes no secret of his pro oil and gas credentials. It is also widely understood that the President seeks lower crude prices for the American consumer.
Ideally, US shale producers would prefer oil prices north of $75 per barrel. That isn't exactly low enough for the President.
Thanks to an uncertain macroeconomic climate, the kerfuffle caused by his trade tariffs and OPEC+ opting to bring more barrels on to an already well supplied market - prices have recently slumped down to $60-65 per barrel. But is that range now low enough for the President? Perhaps not, say many, including global investment bank Goldman Sachs.
Apparently, after a forensic analysis of the President's social media posts, analysts at the bank have concluded that his preference would be for a $40-50 per barrel West Texas Intermediate range. The US benchmark is trading at ~$3 per barrel discount to the global proxy benchmark Brent at the time of writing.
Quoting parts of a Goldman Sachs report to clients, Bloomberg recently noted it as having observed that Trump's "inferred preference for WTI appears to be around $40 to $50 a barrel, where his propensity to post about oil prices bottoms.”
He also “tends to call for lower prices (or celebrate falling prices) when WTI is greater than $50,” Goldman analysts added. “In contrast, President Trump has called for higher prices when prices are very low (WTI less than $30) often in the context of supporting US production.”
However, for US shale drillers this blogger has spoken to, that range is a tad too low. Many are presently hedged 12-18 months out on $70-plus prices. When the hedges come off, a low price environment will bite.
But the President has also been very vocal about US energy dominance - or as Goldman analysts note - tweeting nearly "900 times" about it. Clearly he wants US oil inc. to succeed too. So, where would the happy middle ground be between both sentiment tugs?
Market forces might well decide that, skewing it to one side or the other. The only confirmed thing is the overwhelmingly bearish climate this may all play out in 2025. That's all for the moment folks. Keep reading, keep it here, keep it 'crude'!
Tuesday, April 08, 2025
Oil shed $10/bbl or 14% week-on-week on Trump Tariffs
Wednesday, March 05, 2025
Crude prices in tariff war zone as OPEC+ wakes up
As global stock markets plunged, commodity prices took a knock, oil benchmarks slumped as well and then some more. That's because OPEC+ finally woke up to the reality of its production restraint propping up prices as well, as it continues to hemorrhage market share to non-OPEC producers.
On Monday, with its production already at a one-year high, the producers' group finally decided it had had enough and would start phasing out its 2.2 million barrels per day (bpd) voluntary production cut from April. This would be done via monthly increases of 138,000 bpd until the cuts are fully reversed by Q4 2026.
For clarity, the eight OPEC+ countries - that previously announced these "additional voluntary adjustments" - include Saudi Arabia, Russia, Iraq, United Arab Emirates, Kuwait, Kazakhstan, Algeria and Oman. They were only intending to keep the cuts in place as an interim measure. But kept on rolling the cuts well beyond what they had originally proposed.
However, overnight they provided a downside surprise to the market when many were expecting another rolling over of the cuts. Before news of the OPEC+ decision arrived, crude prices were already trending lower with Brent and WTI front-month contracts down 3.97% and 3.31% respectively, on the prior week. The double whammy knocked the benchmarks further lower with Brent breaking the $70 per barrel resistance barrier intraday.
At 18:42 GMT on Wednesday, the Oilholic noted Brent down 2.55% or $1.81 to $69.12 per barrel, while the WTI was down 2.96% or $2.04 to $65.92 per barrel. All indications point to a bearish week at a time when macroeconomic scenarios ranging from uncertain Chinese demand to the threat of global trade wars point to lower crude prices.
While Trump's moves are often unpredictable, it must be acknowledged that sooner or later OPEC+ would unwind its production. And, so, it has happened! More OPEC+ as well as non-OPEC+ crude may be expected over the near-term tariffs or no tariffs.
Away from oil, but sticking with Trump, here are yours truly's thoughts in an interview with MarketWatch on Trump's plan to tap mineral wealth from Ukraine, and of course, at home and wherever else possible abroad.
That's all for now folks, more to follow over the course of the month. Keep reading, keep it here, keep it 'crude'!