The price-inventory apparent mismatch of crude oil matters to the extent that going long crude appears to be a crowded trade so that the risks are on the downside if it were to happen that the “confirmed” cuts have been more paper ones than real ones.
Julius Baer Research | Oil’s push above USD 58 per barrel on the first trading day of the year seemingly only was a temporary burst of energy. The market’s focus is on quota compliance as the oil producers must now walk the talk of supply cuts. We remain sceptical that the supply deal will have a material impact, swiftly erase surplus supplies and provide lasting support to prices.
Carax Alphavalue | The recent OPEC deal was more than welcomed by the Norwegian oil company which has more than 60% of its production coming from the Continental Shelf. With little by way of refining compared to its integrated oil peers’, Statoil’s (Add, Norway) earnings are a near direct call on oil prices.
UBS | It looks increasingly likely that at its meeting on 30 Nov next week OPEC will agree the production cut envisaged at its Sept extraordinary meeting. In Sept an OPEC-14 produc tion target range between 32.5 -33.0Mbd was agreed, designed to accelerate inventory draw -down and bring fwd re-balancing.
Natixis AM | Currently, the most important graph is the price of oil. Last week, the oil price was was above its level of August 2015. The oil price has started to fall at mid-2014. Since this moment, the oil price was always below the level it had one year before. This has changed last week. It’s the first time since 2014 that we see such a crossing.
Julius Baer Research| As speculation swirls ahead of next month’s informal oil producer meeting, it feels like ground hog day in the oil market. With prices diving into the lower 40s per barrel, talks about supply cuts from oil cartel’s members, OPEC, have resurfaced. We see the chances of any action as exceptionally slim.
The IEA estimates that the drop in production in non-OPEC countries, mainly the US, coupled with the positive trend in demand, could foreseeably shut off the excess of supply in the second hald of 2016, returning stability to the oil market.
Julius Baer Research | The past years’ least loved commodity has made a silent comeback. Coal prices are up more than 30% from the earlier year lows. Northwest European coal import prices, the leading benchmark, trade above USD 55 per tonne. The comeback is in part related to the oil and natural gas price rally.
The precipitous drop in oil prices in particular has forced rentier states, which were able to count on massive energy profits to fund generous state largesse up until a few years ago, to diversify their economic relationships with Europe and the rest of the world. These profits allowed states like Saudi Arabia and Iran to get by with incredibly inefficient economies, which officials in both countries are now actively restructuring in order to stimulate real growth and attract international business.
Calls for keeping a low-key profile till the new UK Prime Minister takes office and agrees terms with its EU partners on the broad Brexit strategy seem to be being largely ignored. Mr Juncker jumped on the opportunity to deliver a stern and ill-timed warning to the UK.