Oil commentary - 6 August 2021
Morning all and happy Friday.?Brent is trading at $71.74 this morning, up 0.45 and WTi is trading up 0.41 at $69.50.?You know when you watch your favourite sitcom, Friends for example - there's always one episode where they use clips of previous episodes to form one episode as the writers decided that's enough for this week??Well, that's today, and it's not out of laziness, more reassurance that I'm not the only one thinking the same way about the current state of the oil market.?Wilson Mizner once said, "If you steal from one author it's plagiarism, if you steal from many it's research".?Well Willy, today I will mainly be using the former.?There was an excellent article written yesterday by Clyde Russell of Thomson Reuters.?I am going to use several snippets of said article (and don't worry I've already spoken to him about it, insert rolling eyes emoji.?Thanks Clyde btw), as evidence of why the current oil market is looking somewhat precarious at these kinds of levels.?"Another month, another weak outcome for crude oil in Asia, the world's top-consuming region, with July's imports declining for a fourth month in five as demand weakened amid high prices and the ongoing coronavirus pandemic."?"However, Kpler's data shows that China's July's imports were the weakest since February last year."?"India, Asia's second-biggest importer, also saw a soft outcome in July, with imports dropping to 3.41 million bpd, which Refinitiv data shows was the second-lowest since it started assessments in 2015." And my favourite particular sentence "The overall picture that emerges is one where Asia's demand just simply cannot be reconciled with a bullish narrative."?Look, I will say this again, as I seem to be saying daily at the moment - I am not being negative.?Far from it.?I am just looking at the figures and data and they all point to demand not coming in as per forecast and, if anything, a lot weaker than forecast.?Now, here's the thing, yesterday UBS came out and said - "OIL SHOULD RESUME UPWARD TREND DESPITE DELTA SPREAD" and "WE EXPECT BRENT CRUDE TO TRADE BETWEEN USD 75/BBL AND USD 80/BBL IN THE SECOND HALF OF THE YEAR" and "WE EXPECT GLOBAL OIL DEMAND TO EXCEED 99 MBPD THIS YEAR AS ECONOMIC RECOVERY CONTINUES".?Here's the reality again though "China‘s Flights Plummet by a Third as Virus Dampens Travel: BNEF".?"Congestion in capital Beijing was down 30% w/w Thursday: Baidu".?And my last piece of "research" - "Gasoline, diesel consumption may drop 10%-20% m/m: ICIS-China".?This is the reality the market faces itself with - bullish forecasts yielding markets at pre pandemic levels versus data that is very quickly scuppering that bullish rhetoric.?Data evidencing demand returning not in the US or Europe but everywhere else needs to ring true otherwise prices could very quickly turn South for the winter, and winter is coming, right John Snowwwww? Thanks again to Clyde and everyone else in my "research team".?Happy National Day to all in Singapore for Monday and enjoy the long weekend.?Go Team GB.?Lates.