
US oil exports reached a record last week at five million barrels a day, according to Energy Information Administration data…
2020-04-01 • Updated
The chart below shows the 25-year horizon of the WTI price performance. 2002-2003 is when the price was at the current level - $20 per barrel. As such, it’s breaking news. Put in the context, it’s one step away from dropping below $20 to match the severity of the 2008-2009 crisis. Will it be there? No one can say for sure. What are the factors though?
Source: www.tradingeconomics.com
If you type “oil” in any of the major media channels, you will see something like “demand collapse, free-market state, price crash, etc”. That’s how the oil market is now. A shock, in other words. Russia-Saudi Arabia standoff and the dissolution of the OPEC+ sent the global oil industry into a “fire at will” stage. Each oil producer is now bound by no agreement and is free to supply and price as desired. Officially, April 1 will be the first day of this chaos, when the output limits agreed by OPEC+ in December end their term. What to expect?
The US Energy Information Administration issued its regular report on March 11, 2020 about the prospects for the global oil industry. As you can see, the world’s supply and demand were supposed to meet somewhere above 100mln barrels per day.
Source: EIA
Note that it was merely three weeks ago, and a week after the failed meeting of OPEC+ on March 5, meaning that the consequences of the disagreement between Russia and Saudi Arabia were already factored in.
Now, only this week the global consumption is expected to drop by 26mln barrels – that is 25%! That means, more than a quarter of the global demand for oil is gone – and that is when Saudi Arabia and Russia are planning to increase their production capacities to record high levels!
How likely oil is to stay at its current decade-long lows if the demand keeps contracting and the supply is set to increase? Actually, in some markets, it already trades at $10 per barrel…
So far, neither Russia nor Saudi Arabia has expressed their will to get back to the negotiation table. In fact, the worse it gets, the more pressing both seem with respect to their chosen policies. Neither does the U. S. seem to be willing to come as the arbiter in this matter. No one to blame, though – everyone is busy saving lives at home.
What to do? Prepare and wait, as usual. A 17-year low may easily drift into a 20-year low and more, given the circumstances and the processes taking place at the moment. Entering the market at the right time may bring immense gains, but it requires precision, and precision requires waiting. Stay with us, then, and wait for the moment.
US oil exports reached a record last week at five million barrels a day, according to Energy Information Administration data…
The past two years have seen the biggest swings in oil prices in 14 years, which have baffled markets, investors, and traders due to geopolitical tensions and the shift towards clean energy.
The oil prices rally and world central banks’ dovish monetary policy caused by the Covid-19 pandemic were the main reasons for current inflation growth…
Western countries are trying to find other options for oil and gas supplies after a 10th package of sanctions, which will put more pressure on Russian oil and decrease global oil supply. Italy, for example, is in talks with Libya.
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Today, at 5:00 pm (GMT +2), the Bank of Canada will publish the Overnight Rate, which represents short-term interest rates, and is pivotal to the overall pricing of the Canadian Dollar in the global markets. Let's look at how the markets are faring ahead of the BoC rates release.
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