Oil Market Review

Monthly Review

  • 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
  • September 2019

    In August 2019, oil prices decreased due to both economic and geopolitical factors. In particular, Brent North Sea quality started the quotations at $64.01/b and closed at $60.36/b, while West Texas Intermediate opened the negotiations at $57.69/b, closing at $55.08/b.

    On August 7th, both the European and Asian benchmark Brent and the American reference WTI lowered to their monthly minimum, respectively pricing $56.41/b and $50.93/b, as the commercial war between the United States of America and China intensified, slowing global economy and oil demand too. Moreover, from July 26th to August 9th, U.S. oil stocks increased from 436,545,000 barrels to 440,510,000 barrels.

    During the second part of the month, oil prices recovered part of the ground previously lost due to the following factors.

    On August 19th, the Shaybah Saudi plant, which approximately produces 1,000,000 b/d, less than 10% of the entire Petromonarchy output, was hit by Yemeni fighters drone.

    In addition, on August 23rd, U.S. commercial inventories dropped to 427,751,000 barrels.

    Last, but not least, on August 26th President Donald Trump said that China wanted to restart trade talks, potentially easing tensions between the two countries.

    Since April 2019, barrel prices have dropped more than 15%. However, currently listings are still higher than prices listed on January 1st 2019 when OPEC+ producers have started to reduce their output by 1,200,000 b/d.

    by Demostenes Floros
  • August 2019

    In July 2019, barrel prices slightly decreased. In particular, Brent North Sea quality opened the listings at $65.93/b and closed at $65.18/b, while West Texas Intermediate started the quotations at $59.60/b, closing at $57.89/b.

    On July 11th, both qualities reached their monthly high – respectively pricing $67.58/b and $60.84/b – due to the fall in U.S. inventories, which dropped from 468,491,000 barrels on June 28th to 458,992,000 barrels on July 5th. Furthermore, hurricane Barry hit the Mexican Gulf simultaneously, decreasing the oil output in the region by more than 600,000 b/d, approximately one third of the entire Gulf production.

    On July 18th, both the European and Asian benchmark, and the American grade lowered to their monthly minimum, respectively trading at $61.66/b and at $54.79/b, due to fears that global oil demand growth will slow down in the second half of the current year.

    During the last ten days of July, barrel prices increased again as a consequence of three concomitant factors:

    1. The rising tension in the Persian Gulf, from which transit 18,500,000 b/d of oil and petroleum liquids;

    2. A further fall in U.S. commercial oil stocks, which diminished from 455,876,000 barrels on July 12th to 445,041,000 barrels on July 19th;

    3. On July 31st, for the first time since 2008, U.S. Federal Reserve cut its interest rates by 25 basis points, bringing them in the range 2-2.25%, with the aim of supporting U.S. economy thus, global oil demand too.

    In June 2019, despite U.S. sanctions, China imported 208,205 b/d from Iran, almost 60% less in comparison with the previous. However, especially from a geopolitical point of view, the fact that the Sino-Iranian energy cooperation is still in place represents a fundamental issue in order to maintain the current barrel price stability.

    by Demostenes Floros