Oil Markets Gazing Towards Next OPEC+ Meeting
by Andreas Exarheas
click here to read the original article at Rigzone.com
*this article was not written by Roseland Oil & Gas
Oil markets are increasingly gazing towards the OPEC+ meeting in June when the group will decide what to do with production in Q3-24.
That’s what Bjarne Schieldrop, the Chief Commodities Analyst at Skandinaviska Enskilda Banken AB (SEB), said in a report sent to Rigzone on Monday.
“Our view is that the group will adjust production as needed to gain the oil price it wants, which typically is $85 per barrel or higher,” Schieldrop stated in the report, adding that, “this is probably also the general view in the market”.
According to OPEC’s website, the next OPEC and non-OPEC ministerial meeting will be held on June 1 in Vienna. The next meeting of the joint ministerial monitoring committee is scheduled to take place on the same day, the site shows.
In the SEB report, Schieldrop highlighted that Brent rose 2.5 percent last week.
“The bullish drivers were, one, commercial crude and product stocks declined 3.8 million barrels versus a normal seasonal rise of 4.4 million barrels; two, solid gains in front-end Brent crude time-spreads indicating a tight crude market; and three, a positive backdrop of a 2.7 percent gain in U.S. S&P 500 index,” he noted in the report.
Schieldrop pointed out in the report that Brent was falling almost one percent “on diesel concerns” yesterday morning.
“This morning Brent crude is pulling back 0.9 percent to $88.7 per barrel counter to the fact that the general backdrop is positive with a weaker USD, equity gains both in Asia and in European and U.S. futures, and, not the least, also positive gains in industrial metals with copper trading up 0.4 percent at $10,009/ton,” he said.
The SEB analyst highlighted that the “bearish angle on oil” on Monday morning was “weak diesel demand with diesel forward curves in front-end contango and predictions for lower refinery runs in response [to] this down the road”.
“I.e. that the current front-end strength in crude curves (elevated backwardation) reflecting a current tight crude market will dissipate in not too long due to likely lower refinery runs,” he said.
“Lots of focus on weakness in diesel demand and cracks. But we need to remember that we saw the same weakness last spring in April and May before the diesel cracks rallied into the rest of the year,” he added.
“Diesel cracks are also very seasonal with natural winter-strength and likewise natural summer weakness. What matters for refineries is of course the overall refining margin reflecting demand for all products. Gasoline cracks have rallied to close to $24 per barrel in ARA for the front-month contract,” he continued.
“If we compute a proxy ARA refining margin consisting of 40 percent diesel, 40 percent gasoline and 20 percent bunkeroil we get a refining margin of $14 per barrel which is way above the 2015-19 average of only $6.5 per barrel,” he went on to state.
Schieldrop noted in the report that this does not take into account “the now much higher costs to EU refineries of carbon prices and nat gas prices”.
“So, the picture is a little less rosy than what the $14 per barrel may look like,” he warned.
Shieldrop also outlined in the report that the “oil product shock from the Russian war on Ukraine has dissipated significantly” but added that “it is still clearly there”.
In a research note sent to Rigzone last Thursday, analysts at J.P. Morgan revealed that their base case “remains an unchanged $90 Brent through May and $85 in 2H24”.
“The risk bias around the call, however, changed in early March from neutral to bullish, with about 25 percent probability of a $100 spike by September,” the analysts added.
In a separate research note sent to Rigzone last Friday, J.P. Morgan projected that the Brent crude price will average $85 per barrel overall in 2024 and $75 per barrel overall in 2025.
by Andreas Exarheas
click here to read the original article at Rigzone.com
*this article was not written by Roseland Oil & Gas