Oil Market Review

Monthly Review

  • February 2020

    In January 2020, despite the fact that Libya decreased its crude production by approximately 800.000 b/d from over 1.000.000 b/d, following a blockade of its main oil export terminals, barrel prices strongly decreased due to fears related to the slowdown of global oil demand growth. In particular, Brent North Sea quality opened the listings at $66.2/b and closed at $58.19/b, while West Texas Intermediate started the transactions at $61.3/b, closing at $51.58/b.

    On January 8th, oil prices reached their seven-month high, respectively quoting $70.73/b and $64.83/b, in the wake of the phase one trade deal reached by the United States of America and China.

    Then, oil prices dropped to their three-month low as a deadly virus in China – named coronavirus – sparked fears of an economic slowdown.

    According to a Goldman Sachs report, the coronavirus could cut world crude demand by approximately 260,000 b/d and prices by $3/b.

    by Demostenes Floros
  • January 2020

    In December 2019, barrel prices hit a three-month high due to the following economic and geopolitical issues:
    1. On December 6th, the 24-country OPEC+ group increased its cuts by 500,000 b/d, bringing them from 1,200,000 b/d to 1,700,000 b/d till March 31st 2020, with the aim of further reducing the current market surplus supply;
    2. On December 13th, the United States of America and China announced that a phase-one trade deal was reached. Therefore, China removed six chemicals and oil derivatives from its list of tariffed U.S. imports.
    3. According to a Bloomberg report published on December 17th, China’s average oil imports reached 11,180,000 b/d in November 2019 that is an unprecedented record high;
    4. Based on the statistics provided by the Energy Information Administration on December 27th, U.S. commercial stocks decreased from 447,096,000 barrels on November 29th to 441,359,000 barrels on December 20th;
    During the last month of 2019, Brent North Sea quality opened the listings at $60.98/b and closed at $66.16/b, plus 24% since the start of the year, while West Texas Intermediate started the quotations at $55.64/b, closing at $61.41/b (+36% in 2019).
    On December 17th, Reuters’ Energy columnist, John Kemp, highlighted that “In the United States, the Federal Reserve has cut interest rates three times by a total of 75 basis points since the middle of the year in a bid to extend the current expansion”. However, it must be taken into account that “FED’s out-of-control” money printing has been dangerously sending stock markets to new all-time highs, while U.S.-China commercial deal specifics are not completely clear up until now.

    by Demostenes Floros
  • December 2019

    In November 2019, despite U.S. commercial inventories steadily surged from 438,853,000 barrels on October 25th to 451,952,000 barrels on November 22nd, oil prices rose by approximately $2.5/b due to the growing optimism about a U.S.-Chinese trade agreement that would remove many concerns dealing with oil growth demand. In particular, Brent North Sea quality opened the transactions at $59.67/b and closed at $62.43/b, while West Texas Intermediate started the quotations at $54.34/b, closing at $55.65/b.

    In all probability, during the next OPEC+ meeting on December the 5th-6th, the Organization will not further deepen its current output cuts (-1,200,000 b/d). However, it may probably roll over the agreement that is going to expire on March 31st 2020 at least, through June 2020 or until the entire 2020. “I hope they will make the right decision for themselves and for the global economy, which is still very fragile”, said Fatih Birol, the Executive Director of the International Energy Agency on November 26th.

    by Demostenes Floros
  • November 2019

    In October 2019, barrel prices remained steady. In particular, Brent North Sea quality started the quotations at $59.5/b and closed at $60.21/b, while West Texas Intermediate crude opened the listings at $54.30/b, closing at $54.07/b.

    On October 3rd, both benchmarks reached their monthly low, respectively pricing $56.53/b and $51.37/b due to the U.S. inventory build of 3,100,000 barrels to a total of 422,000,000 barrels reported by the U.S. Energy Information Administration.

    According to a report published by Global Platts on October 14th, for the first time since April 2019, China imported 10,080,000 b/d in September (+ 11% y-o-y). Over the first nine months of 2019, China’s average daily oil imports stood at 9,910,000 barrels (+ 9.7% y-o-y).

    In addition to these statistics, the rumors regarding the possibility that OPEC+ might strengthen its cuts during the next meeting in December 2019 in order to counterbalance weak demand growth supported a slight oil price recovery, which occurred in the second half of the month.

    On October the 22nd, Le Yucheng, China vice Foreign Minister stated, “as long as both sides [China and the U.S.] respected each other, no problem could not be resolved. No country can prosper without working with other nations. The world wants China and the United States to end their trade war […] rather than a new Cold War”.

    Waiting the developments of this geopolitical stalemate, U.S. oil inventories reached 438,853,000 barrels on October 25th 2019.

    by Demostenes Floros
  • October 2019

    In September 2019, Brent North Sea quality opened the quotations at $58.65/b and closed at $60.78/b, while West Texas Intermediate grade started the listings at $54.65/b, closing at $54.30/b.

    As a direct consequence of the military drone attacks, which occurred on September 14th, both the European-Asian benchmark and the American blend reached their monthly high, respectively pricing $69.18/b on September 17th and $63.07/b on September 16th. In particular, drone strikes hit the Khurais field and the Abqaiq plant lowering Saudi’s production by 5,700,000 b/d. Moreover, U.S. commercial stocks decreased by 6,912,000 barrels from August 30th to September 6th.

    In the second half of the month, barrel prices decreased due to the following factors:

    1. In accordance to Reuters, Saudi Aramco, which is the State-owned oil company, restored its pre level attacks output capacity to 11,300,000 b/d on September 25th. However, that news was not confirmed by the Wall Street Journal. Instead, it was confirmed that the repairs at the Khurais field and the Abqaiq processing facility may take several months and not weeks;

    2. U.S. inventories increased from 416,068,000 barrels on September 6th to 419,538,000 barrels on September 20th (+3,470,000 barrels), instead of a predicted decline of 6,500,000 barrels;

    3. Despite the United States of America accusing Iran of being the perpetrator of the attacks towards Saudi Arabia, Washington did not respond to Teheran with a direct retaliation (war). Meanwhile, Iran announced on September 23rd that the British-flagged oil tanker Stena Impero, which was previously seized, was released;

    4. On September 27th, Saudi Arabia agreed to a partial ceasefire against the Houthi fighters in Yemen.

    In the short term, the barrel prices trend will depend on the results of the upcoming U.S.-China talks that will resume in October, as was decided by China’s vice President, Liu He, U.S. Secretary of State, Steven Mnuchin, and the U.S. Trade Representative, Robert Lighthizer, on September 5th. Actually, the commercial dispute between the two super powers is also affecting global economy and oil demand.

    by Demostenes Floros