Thread on #oil prices
1-
- Oil bulls were stung this summer for two unpredictable events:
a- #Tradewars impact was more severe than expected
b- Number of refinery outages were above average and lasted longer than expected (fires, floods. etc)
- Many oil bears were stung too
1-
- Oil bulls were stung this summer for two unpredictable events:
a- #Tradewars impact was more severe than expected
b- Number of refinery outages were above average and lasted longer than expected (fires, floods. etc)
- Many oil bears were stung too
2-
- No one got the honey, even the bears
- Those who got the price range right, they got for all the wrong reasons.
- If you take out trade wars and unplanned refinery outages, the bulls got the market right more than the bears.
- No one got the honey, even the bears
- Those who got the price range right, they got for all the wrong reasons.
- If you take out trade wars and unplanned refinery outages, the bulls got the market right more than the bears.
3-
- Those were bullish because of Iran & Venezuela sanctions were wrong from the start.
- Those bears who counted on shale to deliver a growth of 1.8+ mb/d YoY were also wrong from eths tart
- Those were bullish because of Iran & Venezuela sanctions were wrong from the start.
- Those bears who counted on shale to deliver a growth of 1.8+ mb/d YoY were also wrong from eths tart
4- What is next?
- Bulls want to see a trade deal with China with normal refinery utilization (adjusted for seasonality). With OPEC cut continuing to end of 2020, Brent would average above $75.
- Bears want to see a decline in economic growth with shale adding 1.5 mb/d yoy
- Bulls want to see a trade deal with China with normal refinery utilization (adjusted for seasonality). With OPEC cut continuing to end of 2020, Brent would average above $75.
- Bears want to see a decline in economic growth with shale adding 1.5 mb/d yoy
5-
- shale will NOt deliver. End of trade wars will deliver economic growth. Even if trade wars are not resolved, any slowdown in global economy is temporary. Bulls will get the upper hand here.
- But the major issue in my view is monetary policy and the value of the US dollar
- shale will NOt deliver. End of trade wars will deliver economic growth. Even if trade wars are not resolved, any slowdown in global economy is temporary. Bulls will get the upper hand here.
- But the major issue in my view is monetary policy and the value of the US dollar
6-
- While a trade deal will help economic growth, strong dollar will limit global oil demand growth. Strong dollar will tame the bulls. Prices will be above the "Trump Range", but not too high.
- While a trade deal will help economic growth, strong dollar will limit global oil demand growth. Strong dollar will tame the bulls. Prices will be above the "Trump Range", but not too high.
7- Shale response to higher oil prices will be muted by the "curse of abundance" of natural gas and NGLs. We will see a strong shale response to higher prices only if prices of natural gas and NGLs increase meaningfully. Technology, efficiency, etc, is relevant at this stage.
8- To sum up so far, it is all about the "demand side" now: economic growth and treh value of the US dollar. All other issues such as geopolitics and #IMO2020 are add on, but not enough on their own.
The "supply side" story is already written for the next 2 years
The "supply side" story is already written for the next 2 years
9- The impact of #ElectricVehicles on oil demand in the next two years is extremely limited. Predictions that global oil demand will peak in 2020 is nonsense. There are many reasons for the lack of impact that I will not discuss here, but I usually discuss in my talks.
11-
- lifting sanctions on Iran and Venezuela will suppress prices, but Saudi Arabia is expected to cut production by then.
- If sanctions of Venezuela are lifted, Venezuela cannot produce more than 1.7 mb/d by the end of the first year.
3-5 years to go above 3 mb/d.
- lifting sanctions on Iran and Venezuela will suppress prices, but Saudi Arabia is expected to cut production by then.
- If sanctions of Venezuela are lifted, Venezuela cannot produce more than 1.7 mb/d by the end of the first year.
3-5 years to go above 3 mb/d.
12-
- Therefore, we need the Canadian crude, and we need more of it. Do not expect major increases in Iraq's oil production. We really need the canadian crude. More pipelines will improve price differentials but limited impact on overall price level.
-
- Therefore, we need the Canadian crude, and we need more of it. Do not expect major increases in Iraq's oil production. We really need the canadian crude. More pipelines will improve price differentials but limited impact on overall price level.
-
13- still talking about crude quality.
- Generally speaking, global demand for additional shale light crude is shrinking
- Additional shale exports are replacing other light sweet crude: recently Saudi Arabia. But US shale replaced the losses from Algeria, Libya, adn Nigeria.
- Generally speaking, global demand for additional shale light crude is shrinking
- Additional shale exports are replacing other light sweet crude: recently Saudi Arabia. But US shale replaced the losses from Algeria, Libya, adn Nigeria.
14-
- so the idea that shale will "always find a home" is incorrect. Once production in Libya and Nigeria recovers, watch out!
- Regardless, we are exporting more because there is no home in the US for the additional shale production.
- Watch price differentials
- so the idea that shale will "always find a home" is incorrect. Once production in Libya and Nigeria recovers, watch out!
- Regardless, we are exporting more because there is no home in the US for the additional shale production.
- Watch price differentials
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