Oil commentary - 23 March 2021
Morning all. Brent is trading this morning at $63.81 down 0.81 and WTi is trading at $60.75 down 0.81. So, it's a year ago today that Boris Johnson announced the first lockdown in the UK ordering people to "stay at home". Hands. Face. Space. What a year. I know I keep going on about "this time a year ago" but it is so important. None of us, and I mean none of us thought we would be in the same position one year later. OK, we're not as bad but still, we are one year on and global travel is still looking like it could be a while away yet. And this is what I want to talk about. The reality to a recovery. Before I start though I want to make it clear that I am not being negative here, not at all, but when people ask me why the oil market has "corrected" by 10.5% since 8th March then it is one simple answer I give - oil futures markets are not in line with reality. Let's use an example - Dubai airport in February had around 2 million people pass through it. It's usually 8 million. Whilst that is obviously better than last May, when nobody could go anywhere without a permit, it is obviously significantly down. And it's been like this for 12 months. Jet fuel demand based on DXB passenger traffic is down 80pct. When does it come back though? Now here is the question, and this is what the market has already priced in, clearly as we are at levels on Brent not seen since before the pandemic was a pandemic. Everyone is leaning on the second half as the time when things get going but honestly, I just can't see it, I hope it is, trust me, but my head tells me differently. Germany last night extended lockdowns until the middle of April and Angela Merkel said, "We are in a new pandemic". Is everything suddenly going to be better come 1st July? Sorry, but no. I see things easing gradually but vaccine passports will take up more front-page press space than Brexit ever did. Let’s bear in mind that Brexit was between one country and the EU. That took four years and a couple of governments. A global vaccination passport? Eesshh. Things will get better, and they are, but the oil market has got carried away and if stats tomorrow show more builds then $70 oil could take the shape of a unicorn. But wait! More free money!! Helloooooooo Unicorn. Good day.