April Newsletter 2019: Oil Market Review

April Newsletter 2019: Oil Market Review

brent-crude-oil-price-april-2019

Brent finally broke $70.00 at the start of April and continued to rally on tightening supplies and US sanctions.

What a month! Game of Thrones season 8 is out, Britain is still in, Iran’s sanction waivers, US production, OPEC production, Russia production, the Game of Thrones production, Libya’s warlord issue, Jon’s white walker issue. Also, did I mention Game of Thrones is out?

Brent finally broke $70 this month on tighter supply despite economic woes. Allow me to give you an overly-simplified view of what happened to prices this month. April starts with Brent at $69 which rallied to $72 after further cuts from the oil-producing nations. Saudi production dipped another 300kpbd to 9.8mbpd while OPEC’s overall production dropped by 300kbpd as well. The low drop is kind of deceptive as 200kbpd of production came back online from Libya’s El Sharararara oil field after being liberated from militants. However, greater uncertainty ensues as Libya’s civil war escalates with Haftar mounting an attack on Tripoli, the country’s capital.

Outside of OPEC, Russia is again dragging its feet on crude production cuts. From December 2018 till March 2019, Russia has reduced its crude output by 150kbpd or 1.3% of overall production. Comparatively, during the same period, the Saudis have cut production by 850kbpd (8% of overall production) and OPEC as a whole has cut 2.15mbpd (6.6% of overproduction). Whoever said that there’s no “i” in team obviously didn’t pay attention during their Latin language class. Then again, a barrel cut is still a barrel taken out of the global supply chain which rallied Brent to $72.

Then on the 18th April, the US announced that they will not be extending Iran sanction waivers for the 8 nations. This could potentially take out another 1.3mbpd from the global supply chain as US targets 0 exports. Iran’s production has already dropped to 2.7mbpd, lowest since Jan 2014. Brent rallied more than $2.00 to $74.73 at its highest and has stayed above $74 ever since. However, the actual impact might be much more muted. China and Turkey have already gone “Ha! Nope!” in politically correct terms. India is weighing the costs. South Korea is openly not happy about it. The rest are pretty much silent or have already weened themselves off the cheap Iranian crude.

Now, the conspiracy-theorist-me got tingling and he says the greatest threat against the sanctions aren’t the 8 nations but the US itself. Trump has already started his re-election campaign and he has been touting for lower oil prices for as long as I can remember. During the last round of sanctions, the waiver grants were announced barely a week before sanctions started. And the POTUS is Trump. So, what was a non-extension might not be a non-extension after all. Then again, the Saudis and Russia have openly stated that they are more than willing and able to take up the slack. The real-world-me can’t be bothered to guess anymore. Que sera, sera.

That pretty much explains the supply side of $74.00 Brent. Not in a totally wholesome manner but enough muddle through a night at the bar. These have pretty much overshadowed demand side of the equation. The biggest issue on everyone’s mind is still Brexit. The UK and EU continue their tormenting struggle of answering “Will she or won’t she”. Hopefully, it will be resolved in the coming months and we will all have a little more certainty.

USEP-Price-Oil-Market-April-2019

After spot volatility in Q1, April seems to have calmed down a little.

April 19 spot price thus far has started off a lot less exciting than March 19. The first week was surprisingly low averaging at only $93.30/MWh before gradually picking up to about $105/MWh for the rest of the month with only 2 days of slight volatility. If the power futures were any indication, we would be at about $110/MWh next month as well.

Onwards to OEM! The last zone in Singapore would be open on the 1st May 2019 and everyone will be eligible to switch to an independent electricity retailer. For consumers looking for Green plans, look no further than iSwitch! We give away free Green plans to all our online sign-ups and we are the largest Green electricity retailer in Singapore. So you get to save the environment and your wallet. To date, we have offset the carbon equivalent of 175,000 trees which is about 1.5 times the size of Sentosa. Just imagine if 175,000 trees ever got planted on Sentosa. Whatever will happen to the Merlion, USS or Siloso Beach?!?! Dear God……. #SaveSentosa

Zheng Tianbai, Analyst
Written on 25th April 2019

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