February Newsletter 2019: Oil Market Review

February Newsletter 2019: Oil Market Review


Happy Chinese New Year everyone, welcome to the year of the Pig!

First off, a quick reminder for those living in Singapore that you can now move away from SP Services for your home electricity supply and move to iSwitch. Significant savings available at the iSwitch website.

Crude managed to claw back more gains this month with Brent gaining another $4/bbl over the month. Much more bullish support came from OPEC. Iran, Libya and Venezuela continued their unwilling contribution to the cuts despite being exempt from the deal and are producing 900kbpd less than when the deal was struck. This, coupled with a strong performance from the core OPEC members, led by Saudi Arabia brought overall OPEC supply 800kbpd below the targeted quota. The Saudis provided further momentum as they promised to perform over and beyond with Al-Falih announcing an additional 500kbpd of cuts in March suggesting that the market may continue to tighten.

However, not all is as rosy as OPEC will like to paint it. As concerns grow over the global economic situation, oil demand forecasts continue to be reduced with demand growth expectations for the year reduced by another 60kbpd this month. There is also the additional issue of growing Non-OPEC production with US leading the charge with an expected production growth of 1.8mbpd this year. So while OPEC may be able to tighten the market by cutting production, how much market share are they willing to give up to support prices?

And of course, there is Trump. To our bewilderment, Trump took centre stage in the oil market again this month via a single tweet: “Oil prices getting too high. OPEC, please relax and take it easy. World cannot take a price hike – fragile!” That was all it took for Brent to collapse almost $3/bbl! Impressively, these 20 words signifying Trump’s wishes had more impact on the oil market than Al-Falih’s commitment to a 500kbpd production cut. Really makes one wonder what the market is thinking while it does its thing. Also, if I should ignore oil fundamentals and be a fulltime “Trump-Twitter-Reader”. Pretty sure that’s a legitimate occupation somewhere in this crazy world. One thing is for certain, political intentions is going to continue to play a major role in the oil market for the foreseeable future.



Closer to home, the Singapore power market proved tranquil in February as everyone enjoyed their holidays over the Chinese New Year. That is, until the 16th when USEP exploded despite lower demand over the weekends. The day saw prices soar to over $1,350/MWh and added $15/MWh to the entire month’s average. Highlights the fact that the pool market in Singapore remains a highly volatile market and a single day’s outcome can make a significant difference even in the long term.

Zheng Tian Bai, Analyst

Written on 28th February 2019

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