Oil commentary - 8 March 2021

Morning all and I hope everyone had a good weekend. Did I miss much? Didn't think so. Brent is trading this morning up 1.31 at $70.67 and WTi is trading at $67.30 up 1.21. Like a buffet breakfast - quite a bit to get through this morning. OK so as you all know, unless you've been hiding the behind the sofa like Jurgen Klopp at Anfield, that OPEC maintained production cuts for April, with Saudi also rolling over their voluntary cuts of 1mn bpd. This was not what was expected by 95% of the biggest economist brains out there and prices went from a low of $63.33 last Thursday afternoon, to a high of $71.38 at the open this morning. A 13% rally. Nice. Nice work. The last time Brent was at these kinds of levels was 28th May 2019. Unai Emery was the Arsenal manager. Who? Exactly. I have to say though that what with Grandpa Joe's stimulus package getting through the Senate (just) and attacks on Saudi oil installations over the last few days that I thought we'd open higher. I mean you don't really have a choice if you're a fund to do anything apart from buy on all this news but there seems to be a definite lack of urgency to send prices much higher. I say that and London will probably wake up knowing the kids have gone back to school and go bananas, $80 here we come. The thing is though is that EU gasoil refining margins are at the lowest they have been for six months. Crude demand is waning right now owing to refinery turnaround season so if you look retrospectively then the OPEC+ decision last week was not a difficult one to come to, even though we all thought "well of course they'll increase production if Brent is at $66". The story would be a lot different if we had seen both OPEC+ and Saudi bring back production. Next month though? Well, with refineries back you'd argue that they will have no choice but to increase production. This rally though is based on supply curtailment, not demand. Rig count increased last week just FYI. Drill baby, drill. Good day, and week to all.