Oil commentary - 3 June 2020
Morning all. Brent is trading this morning at $40.39 up 0.82 and WTi is trading up 1.05 at $37.86. Crisis? What crisis? Honestly, only a West Brom fan would understand what comebacks felt like apart from those in this oil market. $40 oil. Amazing. OPEC+ are likely to extend the duration of their historical cuts and apparently a small draw on US crude stockpiles. Does it get any better? Hmmmm. One thing that Covid-19 has taught us, apart from the fact that perhaps botox isn't THAT important, is the balance the world has come to terms with, the point and counterpoint of the things that we need. The oil market has forgotten this however and has only seen that the path to illumination is to ignore fundamentals and take solace that restrictions have been eased and supply curtailed. Ahhhhh, karrmmmaaaaahh. What was it Roy Lichtenstein said? Ah yes "The melody haunts my reverie". And the bulls have had their melody stomped over by a flock of oil drillers. I wonder what the collective term is for a group of drillers? A parliament? No, too posh. A murder? Way too much. A gaggle? Yes, let's go with a gaggle. So, the bulls have been awoken from their reverie by a gaggle of drillers armed to the hilt with greasy faces and new technology. What am I referring to? Well, get this - yesterday, Parsley Energy said that it is bringing back the “vast majority” of its curtailed production in June. Parsley shut down around 400 wells in March. EOG Resources said it plans to “accelerate” production in the second half of 2020, finding prevailing oil prices sufficient to step up drilling activity. MAKE AMERICA PUMP AGAIN might just be splayed all over Donald's stupid red cap over the coming months because, one thing is for sure, US oil production is not going to join in on any cuts that OPEC+ might pressure them in to. Why would they when it has been so evident on how much US employment figures are affected when WTi flat price drops below $20? I'm not going to say below $0 because that seems like nothing apart from an aberration. So where does this leave us? Well, it was certainly a matter of when and not if, prices got to a point that deemed US production could start up again. I don’t see it getting to the record levels we saw at the start of the year but it will come back and that certainly won't help the rebalancing act so many seem to think is not that far away. EIA data at 1530GMT. Good day.