To me, investor sentiment the oil market changed last week – to the bullish.
For the last few months, oil has been caught between two opposing forces – (very) fast rising US production vs. Saudi cutbacks.
When the Saudis announced late last week that March loadings would average 9.8 million bopd – under 10 million, and well under what their OPEC cut quota is, the Market finally stood up and listened to what the Saudis have been screaming for weeks: they are willing to do whatever it takes to keep prices high.
Hear my thoughts, straight from deep within the OGIB Mission Control:
For the Saudis to do whatever it takes – it takes a lot, as the US has every bearish stat you can think of:
- More accurate monthly stats are showing the weekly numbers are UNDER-estimating US production by some 300K bopd… so that 11.9 is really 12.2 million.
- Rig counts are not falling in any meaningful way (they are falling but just…)
- US producer budgets are not falling in any meaningful way (they are falling but just…)
- DUCs at record 4000+
The only bullish thing I see in the US is that Permian gas prices (WAHA) have gone negative a few days and sit around 30 cents/mcf now. This means realized pricing in the Permian should be lower than people think… and at some point, should have an impact (lower) on Permian production… whenever the Market chooses to pay attention to that.
Global demand increases continue to be in the 1.2-1.5 M bopd range, so this potential move in oil price is more supply driven than demand – and that makes this move, IMHO, more volatile.
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