Easing of Lockdown Bounce
Prices have been rising on Brent as hopes that the global recovery post covid-19 will be swift, bringing normal levels of demand back to the battered market. Prices on front month futures have pushed above the $40 level and even Goldman Sachs has raised its oil price forecasts to a $40.40 year average for Brent and $36 for WTI. It’s not amazing, but it’s a better outlook than two months ago for sure.
I’ll Be Back Part VIII
We noted yesterday that Libya had opened up two of its oil fields after the withdrawal of troops. However, this morning we learn that ‘armed men’ have taken over the site. The fluid situation in the three-way civil war – caused by the Western hatchet job intervention in 2011 – there is sure to be many more returns to production until a more stable political situation resumes. It’s impact on the global oil supply may be small relative to other suppliers, but sustained activity out of the market, or in the market producing, could make significant enough differences to the world oil supply.
Woooow There Oil
Hedge funds have reduced their buying on oil contracts as prices have doubled since April. Funds and other money managers purchased the equivalent of just 6 million barrels in the six major petroleum futures and options contracts, the smallest for nine weeks. At the least this is a pause in appetite for oil, whether this will signal a correction down or a renewed buying spree is yet to be seen.
Door Ajar for Comeback Kid
With the large increase in Saudi crude physical prices there could be an opening for US oil to make a comeback. To offset the decreasing amount of crude while not harming their finances, the Saudis are trying to complete a balancing act between supply and price. Get this wrong and they may open the door further to US suppliers to increase exports and steal foreign buying interest. Get the supply wrong and the US can flood a market that needs it, get the price wrong and the US can undercut to get as much exported as possible. It’s a tough situation to manage for the Saudis and leaves the door ajar for another US shale comeback.