Portocolom | Oil rose to the highest level in more than six years in New York (78 USD/bl) after the OPEC meeting failed to agree on a production increase. The United Arab Emirates rejected a proposed eight-month extension of production limits. The most immediate effect of the rupture is that OPEC and its allies will not increase production by August and this will deprive the global economy of vital additional…
Julius Baer | The oil market continues to write history. The past days and weeks brought us an unprecedented demand collapse, unprecedented oil politics and the absolute novelty yesterday: negative oil prices. The US benchmark West Texas barrel sank by -305% and became negative at -37.63 $/b. Before you rush to the petrol station, negative prices are a temporary glitch reflecting stressed flows in the futures markets and stressed storage conditions somewhere in the US Midwest.
Eirini Tsekeridou (Julius Baer) | Oil prices have declined massively over the last weeks, as Russia and Saudi Arabia could not reach an agreement regarding output cuts. Saudi Arabia is trying to punish Russia, while Russia is seeking to hurt US oil producers due to US sanctioning of Russian companies. US shale producers, especially the highly leveraged ones, will face default as their breakeven price is about USD 50 per barrel.
Growing concerns from US and European investors and regulators over the sustainability of integrated oil and gas companies’ business models have brought forward their potential impact on the sector’s credit quality to the medium from long term. Scope Ratings says the near-term, 2020 credit outlook for the integrated oil & gas sector remains stable.
Neil Dwane (Allianz) | The financial markets are signalling that the situation in the Middle East won’t get out of hand, but US-Iran friction could continue for some time. The defence industry and oil and gas-related sectors could remain well-supported, but overall we believe investors should be cautious yet patient. Look to higher-quality stocks with lower correlations to the broader market and “hunt for income” if headline volatility is a risk you wish to avoid.
Norbert Rücker (Julius Baer) | Oil prices sold off more than 4% as concerns about supply risks in the Middle East calmed. The latest actions and reactions show that both opponents, the United States and Iran, are shying away from a military escalation out of fear of its potential economic costs. We stick to our Neutral view on oil and see oil prices lower towards year end. Demand should remain soft amidst weak growth, while supplies increase from Canada to the North Sea.
Mueid Al Raee (The Conversation) |Whether or not the Americans actually want higher oil prices, there are certainly good economic reasons why they probably won’t mind them. Deepening the chaos that started with the US withdrawing from the West’s nuclear deal with Iranis an “easy” way to achieve higher oil prices while meeting other strategic objectives. Yet how the Europeans, China and Russia respond will also determine the global flow of oil from Iran and Iraq.
Norbert Rücker (Julius Baer) | The oil market is off to a rocky start as the tensions between the United States and Iran escalate. The situation brings lots of uncertainty and geopolitical tea-leaf reading on reactions. While the closure of the Strait of Hormuz remains a very unlikely event, the deterioration in Iraq bears supply risks. Geopolitics tend to be a temporary force on oil markets and we believe this time is no different. We raise our near-term forecast to USD 65 per barrel, and maintain a Neutral view on oil.
Bankia Estudios | The sharp increase in oil prices produced by the attack on Saudi installations happened as a moment of weakness in the global economy with multiple centres of uncertainty (trade war, Brexit, global industrial recession, among others); however, it would have to be persistent and much more intense to derail global expansion.
The Corner | For the second time this month, oil prices dropped below 60 $ per barrel. Growth concerns and a bearish market mood drove the latest sell-off, but fundamentals are now adding to the price pressure. US oil inventories swelled unexpectedly and led to a drop in oil prices.