Oil commentary - 2 March 2021
Morning all. Brent is trading this morning at $62.80 down 0.89 and WTi is trading below the all-important $60 per bbl mark, currently down 0.76 at $59.88. So, Brent edging closer to $60, ah yes, that must mean an OPEC+ meeting is nigh, and indeed it is. I wonder though, what does the market expect will happen? As I mentioned yesterday, it has been nearly a year since the toys were put back in the pram and OPEC+ got together, shook hands and made up, or should I say fist bumped. Hand shaking - sooo last year. Or for the first few weeks of it, at least. Anyway, yes nearly a year has passed since that extraordinary agreement was reached and compliance has been rather splendid actually, apart from maybe Iraq. But they too have done an incredible job. Does this mean the game is now up? Hmmm, stay tuned for my OPEC report coming out tomorrow for my thoughts on that but the answer is quite simply, no. To be honest I'm a little concerned of opining either way, nobody wants to "ouch like hell", do they? But put simply the market is still extremely fragile. We are in a much better position by far than we were during Q2. Remember those times? When banana bread was exciting, and you couldn't work out how to invite anyone to a Zoom call? One thing is clear though, is that prices have become too high, too fast. I'm all for recovery but at the moment we are in the extraordinary position where physical fundamentals are causing the current downtick in prices. When has a Wall Street fund ever looked at fundamentals for price direction? I mentioned this a couple of weeks ago - last year’s saviour for the oil market was really China. They are starting to enter turnaround season, several VLCC's failed subs yesterday. Will market structure evidence this lack of prompt buying over the coming days? What will stats tomorrow tell us about crude stocks in the US? Will buying pick up in April once China comes back? Shall I ask another question? If flat price continues to drop then keep your eye out for an OPEC minister to say something bullish and we could see a pop. Good day.