Oil commentary - 23 April 2020

Morning all. “It'll be all right, my fine fellow," said the Otter. "I'm coming along with you, and I know every path blindfold; and if there's a head that needs to be punched, you can confidently rely upon me to punch it.” The words not of Donald Trump to every US oil producer, but of Kenneth Grahame who wrote The Wind in the Willows. Still, words I'm sure every shale/Texan/other US oil producer is clinging on to right now in the hope that one of those orange arms is thrust around them in support. This is not a typo - Brent is trading up 2.11 this morning at $22.48 and WTi is trading at $15.20 up 1.42. Imagine me writing that 4 months ago. You would have called the authorities and had me sectioned immediately. But this is the reality the oil market faces itself with. To put it in to context, WTi is trading up 11% this morning. 11%. Madness. I know the question you're all asking - If someone worships exhaust pipes, are they a catholic converter? No not that, but it's a very good question. The real question - Why are we trading up? Yesterday we hit a low of $15.98 on Brent but settled at $20.37. This on the back of EIA data that showed a 15mn build on crude oil and gains on other products, yes maybe gasoline builds were lower than forecast but a build, nonetheless. Rumours of production falling are just that rumours really, but it is inevitable that the price devastation we have seen over the last three months will of course shut in production by default. We are still to hear from anyone about additional voluntary cuts and this is highly disappointing to those producers whose fiscal budget relies on oil revenue. If prices do continue this upward trajectory we have witnessed over the last 24 hours, seemingly only on the back of nothing but an aggressive tweet from his Donaldness, then the less likely we are to hear from anyone before the week is out. However, deep within the bowels of this ever-gloomy outlook we find ourselves constantly in right now there was one glimmer of hope I read this morning. A US oil fund is calling $100 per bbl oil. Boy do I want what that person has for breakfast. I bet it's not marmite on toast let me put it that way. "…Now, with the oil price crash, the Permian Basin has been burdened with bankruptcies and tens of thousands of fired and furloughed employees. So, when we are able to return to business as usual, there will likely be a shortage of spare capacity. Low supply, high demand. That’s how these things work. Keep an eye out for $100 barrels coming down the pike.". Amazing. I think I'll end things here today. Good day y'all and watch out for triple digits !