FXEMPIRE
All
Ad
Corona Virus
Stay Safe, FollowGuidance
World
59,924,042Confirmed
1,409,813Deaths
41,421,646Recovered
Fetching Location Data…
Advertisement
Advertisement
Cyril Widdershoven
Abu Dhabi at night, oil, conference

The current optimism shown in the media and increased oil prices due to the unexpected positive results of Pfizer’s vaccine and the Joe Biden victory in the US presidential elections was not available at all. Mainstream market players such as ADNOC, OMV, VITOL or market analysts, such as Energy Intelligence, Platts and Argus, are rather reluctant in a more optimistic view of the market yet. Most are even indicating that the risks currently seen hovering in the market are too large to expect even a minor price increase very soon.

At the ADNOC Trading Forum, part of ADIPEC, the impact of COVID-19, global oil and gas demand destruction and the US election results were leading the discussion on the market situation. In several discussions fear was shown about the possibility of an OPEC+ strategy change to allow in January 2021 more oil to flow to the market. At the same time, traders and analysts agree that the current oil stock draw is too fragile to be a basis for optimism. They all also referred to already clear dangers in the market on the short term, as Libya’s unexpected production surge, now recorded at around 1 million bpd, and a possible US decision in January 2021 to rejoin the JCPOA agreement with Iran, is not to be taken lightly.

Advertisement

Additional oil volumes are not able to be consumed in the current market situation, putting additional pressure on price settings and possibly result in filling up available storage space again. The impact of the re-emergence of COVID related lockdowns in the EU, and other places, combined with some scepticism about the Pfizer vaccine or others’ impact on the short term, is not providing a boost to optimism.

As the market fundamentals are still very fragile, and OPEC+ members are reassessing their overall production strategies or even not committed at all, lower economic growth overall or new production volumes could hit the market hard. Demand is still fledgling everywhere, so no room for mistakes.

The latter skepticism became clear when the Forum asked the participants to give their views on oil prices the next 12 months. According to Energy Intelligence, Platts and Argus, overall expectations for oil prices in 2021 are at high $30s – mid $40s per barrel.

The latter means overall optimism is not being supported at all in prices. In a panel with Martin Fraenkel , Global Platts, Euan Craik, Global Head Crude, Argus Media and Alex Schindelar, President, Energy Intelligence, all three however agreed on a more optimistic situation in 2022. Still, the oil analysts indicated that room for improvement will depend on COVID constraints and the resilience of the market to counter possible set-backs.

When asked about resilience and the state of the market, Russel Hardy, CEO Vitol, said that 2020 has shown how resilient the hydrocarbon sector still is. The major breakdown of demand, due to the Black Swan event, has been confronting the sector with an unexpected roller-coaster ride in H1 2020. The current H2 is seen as a preparation phase for 2021. He reiterated also that the market has become more stable, but we are far from getting back to normal.

Kajo Fujiwara, Executive Officer Crude Trading and Shipping of Japanese company ENEOS, stated “work continued even in Covid time”. Fujiwara reiterated that margins are very low. The ENEOS official sees improvement in H2 2020, as demand came a bit back and refinery runs were increased accordingly.

The main backer of ADIPEC and ADNOC Trading Forum, Abu Dhabi’s national oil company ADNOC also was taking part. When asked about ADNOC Trading, Khaled Salmeen, Executive Director, stated that the company “has not stopped doing what we wanted to do….we wanted to go strong on trading and we are as ADNOC Global Trading is going to go live in next weeks”. During H1 2020 the company had to deal with the demand and supply challenges, “all hands on deck”. ADNOC Trading however still focusses on sales growth, and also to increase storage. ADNOC Trading’s crude book has become life in September, while its products book via Global Trading is going life in the next weeks. In March 2021 it also is pushing ICE Murban Crude futures via the ADGM.

The trading arm of ADNOC, which is another example of GCC based NOCs entering the commodity sectors in full, also is interested in further expansion. Part of this will be a representation in the USA. Expansion plans are targeting Singapore, Europe and USA. At the same time, Salmeen stated that ADNOC Trading is also looking at shipping. ADNOC has been always been an FOB seller. Shipping is going to be a main part of all. Prices of second hand and new builds of vessels at present is very attractive. Investments are still planned. Key products to target for shipping is for products but for sure in crude. International storage is also being targeted.

With a full bird’s eye view of the market, most participants have been giving a mixed or foggy message. VITOL’s Hardy stated that current messages in the market, including the potential impact of Joe Biden as US president, is being digested right now. The full impact of all at present again is unknown, so volatility has increased. Hardy still sees some difficult couple of months are ahead. Real optimism, according to Hardy, could be in the market during H1 2021. Hardy also doesn’t expect significant demand increase for the winter 2020-21. If there is a COVID vaccine, the real impact is not measurable in the market before end H2 2021.

VITOL, ENEOS, OMV and even market analysts such as Argus, EI and Platts, all stuck to the story that the OPEC+ strategy is one of the major fundamentals to be watched. With already some draws of stocks in the market, OPEC+ postponing of its strategy will be also a support.

For a look at all of today’s economic events, check out our economic calendar.
Advertisement
Don't miss a thing!
Discover what's moving the markets. Sign up for a daily update delivered to your inbox

Trade With A Regulated Broker

  • Your capital is at risk
IMPORTANT DISCLAIMERS
The content provided on the website includes general news and publications, our personal analysis and opinions, and contents provided by third parties, which are intended for educational and research purposes only. It does not constitute, and should not be read as, any recommendation or advice to take any action whatsoever, including to make any investment or buy any product. When making any financial decision, you should perform your own due diligence checks, apply your own discretion and consult your competent advisors. The content of the website is not personally directed to you, and we does not take into account your financial situation or needs.The information contained in this website is not necessarily provided in real-time nor is it necessarily accurate. Prices provided herein may be provided by market makers and not by exchanges.Any trading or other financial decision you make shall be at your full responsibility, and you must not rely on any information provided through the website. FX Empire does not provide any warranty regarding any of the information contained in the website, and shall bear no responsibility for any trading losses you might incur as a result of using any information contained in the website.The website may include advertisements and other promotional contents, and FX Empire may receive compensation from third parties in connection with the content. FX Empire does not endorse any third party or recommends using any third party's services, and does not assume responsibility for your use of any such third party's website or services.FX Empire and its employees, officers, subsidiaries and associates, are not liable nor shall they be held liable for any loss or damage resulting from your use of the website or reliance on the information provided on this website.
RISK DISCLAIMER
This website includes information about cryptocurrencies, contracts for difference (CFDs) and other financial instruments, and about brokers, exchanges and other entities trading in such instruments. Both cryptocurrencies and CFDs are complex instruments and come with a high risk of losing money. You should carefully consider whether you understand how these instruments work and whether you can afford to take the high risk of losing your money.FX Empire encourages you to perform your own research before making any investment decision, and to avoid investing in any financial instrument which you do not fully understand how it works and what are the risks involved.
FOLLOW US