Another month another newsletter. Where do I even begin? Stockpiles, World Cup, OPEC, Trump, China, Libya, England, Norway and the list goes on and on and on. Basically, a 2018 rendition of Billy Joel’s “We didn’t start the fire”.
Crude Oil Prices: Oil hit a month high of $79.44 in June before retreating to $73.05 on news of US, China trade war.
Let’s start with the metaphorical elephant in the soccer field. France Won! The World Cup! Where’s Croatia?! 2018 is full of surprises. Germany, Brazil, Argentina, Portugal were among the top contenders and despite having some of the most expensive players in the world, they crashed out in a spectacularly. Perhaps it’s the all-star syndrome or just the Russian weather. Who knows? All I can be sure of is that Neymar would definitely have a career in Hollywood should he decide to quit soccer. There was much anticipation for England to perform but alas, they only made it to the semi-finals.
And speaking of Brexit, news from across the pond is as hazy as a Beijing afternoon. The UK PM has come out and claimed that it’s going to be a soft Brexit but never defined what that really means. I think it’s just the default response of the UK government for now. David Davis, the guy in charge of the Brexit negotiations quit and our golden boy Boris left shortly after as well. Theresa May might be out whether she wants to or not. An exodus of these figures would spell an interesting time for the Brexit talks.
Now where would we be without Trump? Probably in a more peaceful world but cé la vi. For as long as I could remember, Trump has been trumpeting (yes, I just did) that oil prices were too high. He was fairly happy after last month’s OPEC meeting but a slew of factors rallied the markets again. No exemption from the Iran sanctions (which is technically US’s doing), Libya’s port got attacked cutting exports by 400k bpd, economy is roaring ahead, US stockpiles were going down and Norway’s oilmen went on strike demanding higher pay. Not even Saudi’s and Russia’s production spike of more than half million barrels per day could prevent Brent rising from a low of $72.47 to a high of $79.55.
To Trump’s credit, he did pressure OPEC to adjust their production forecast up by another million barrels a day and on an completely separate note, imposed tariffs on $234 billion worth of goods on China. Bringing us down to the current $74/75 Brent. Even a record draw on US stockpiles couldn’t reverse the bearish sentiments. Now, US officially said they were in principle fighting against unfair trade practices. But the conspiracy theorist in me thinks Trump did this knowing that he’ll achieve his goal of lower oil prices. Looking at the equity markets and commodities markets, it’s either a brilliant stroke of scorched earth warfare or a chronic exposure to FOX News. Knowing Trump, I really wouldn’t know.
Now, what really terrifies me is that China has yet to seriously respond. They said that they would not take well to aggression but has not penned down any concrete battle plans. That might’ve changed by the time this article is published but I am certainly not looking forward to the inevitable announcement.
All in all, oil is in for another rocky ride. Couple of things to take note of in the coming months:
- China’s response to the addition 200 billion goods tariff from US
- US’s position Iran sanction waivers
- Libya’s oil conflicts are in resolution
- US crude stockpile levels for the coming months
Oil market aside, let’s take a reflection of this year’s USEP spot price. May 2018 has shown the highest spot average in 3 years. June 2018 has been the third highest and July 2018 is fast becoming a strong contender. I can go on about the some of the highest spot months, but I would quickly run out of 2018.
OEM is starting soon and finally an end to my tormenting wait for a cheap power bill. The agony of watching Jurong residents have their pick at retailers while I am unable to anything about it. Come October (allegedly) I shall foray into the lush jungle that is the OEM to hunt for what we Singaporeans love best; Cheaper stuff.
Author: Zheng Tianbai, Analyst, iSwitch Energy Team
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