Oil commentary - 12 March 2021

Morning all and Happy Friday. Brent is trading this morning at $69.35 down 0.28 and WTi is trading down 0.35 at $65.67. I have to be honest. I just don't understand. I don't understand this oil market. Does that even matter? Nope, not at all. What is it I don't understand? Allow me to explain. Yesterday we saw the latest downward revisions to OPEC's demand forecasts. The can full of demand beans has been well and truly kicked in to Q3. “Ongoing lockdown measures, voluntary social distancing and other pandemic-related developments” said the group. This is no surprise. But I remember reading this last July. Then last September. And then I think in December as well. Fair enough, the whole recovery from COVID is very fluid, I get that but how did the market react to this negative news? Well in a positive way of course!!! Duhhh. Because bad news is actually good news, didn't you know that? "Sorry love, lost the house in a poker match last night", "Oh good, would you like a sandwich?" Yeah, nah. And this is the thing, weak demand means that OPEC will, more than likely, roll over production cuts until they start seeing some real signs that demand is returning. Oh, here's another thing as well from JP Morgan “At current prices, most U.S. onshore operators are economic, leaving a vast group of operators, from large public companies to private players, in good position to ramp up activity in 2H21 and build solid momentum for higher volumes in 2022,”. Oh right, brilliant yep thanks a bunch. I mean it really was a matter of time before flat price got to a point that it manifested itself into higher cost producers firing up those nodding donkeys again. So, more supply, more supply 2H 2021 as well, just when OPEC see demand returning meaning they can increase their own production. Yet Brent rallied last night all the way up to $69.84. Ummmm. Yeah. Turn the lights off, thanks. Good weekend.