Oil prices remain largely stable but concerns abound, while the market braces for some OPEC+’s curtailed production to return soon.
Rystad Energy’s daily market comment comes from its Head of Oil Markets Bjornar Tonhaugen:
"Oil prices are largely stable this morning, in a day when no piece of news is sufficiently strong to push them clearly to one direction.
Despite the very marginal gains that Brent is having, the oil market is revealing signs of concern. The price for prompt delivery is getting cheaper compared to the price for deferred contracts, which normally happens when the market is getting looser and when expectations for a more comfortable oil supply situation are on the rise.
This seems to be the case now, as expectations for near term supply-demand balances are gradually being reset, resulting in a rising discount of prompt barrels to deferred delivery.
The market is not putting too much emphasis on the news that Iran has started military drills off the Strait of Hormuz in the middle of the country’s coronavirus crisis, but it’s always worth watching the world’s most important oil transit chokepoint where 16-17 million barrels of crude passes through each day.
The more important news impetus to watch is the weekly US oil statistics tomorrow and the views of the Fed the same day about the outlook of the US economy.
If refinery runs tick down again, it will be a clear bearish signal to the market that demand is not recovering as quickly as expected.
Meanwhile, real-time road traffic indicators suggest gasoline demand is flattening out instead of keep being mended.
Cases of Covid-19 are rising, yes, but these days traders have also another concern casting a shadow to their calculations.
OPEC+ is cuts tapering is only four days away and everyone is waiting to see how opening the oil taps will affect the market. This anticipation is never one that boosts prices.
The extra OPEC+ barrels are set to create a new mini glut that will but some extra burden to inventories, as the oil demand recovery is now seen muted for the coming months."
Read the article online at: https://www.oilfieldtechnology.com/special-reports/28072020/oil-stable-as-concerned-traders-brace-for-supply-increase/