Belt up! Oil prices have embarked on a big roller-coaster ride that has plenty of sharp ascents, descents and twists along the way. The track’s direction is generally higher, but its end is not in sight.
Benchmark crude futures rallied throughout this week and were swinging either side of their Thursday’s three-year-high close in volatile intra-day trading Friday.
Speculative net length in ICE Brent and NYMEX WTI crude futures, at a combined 1.15 billion barrels equivalent, was close to its historic high as of April 3 based on the latest data available, and might have set a new record since, given this week’s price spike. That forebodes heightened crude price volatility in the coming weeks.
Oil prices have progressively come under the biggest and most diverse set of influencing factors in recent memory, which are not easy to aggregate on any given day or even over the short term.
The financial markets turmoil that began in early February amid a panic attack over accelerating inflation and spiking interest rates was the first major distraction for an oil market that was already juggling fundamentals with geopolitical tensions. Barely had it subsided, when a rash of planned and implemented US import tariffs against major trading partners rattled stock indexes around the world and shook the confidence of oil bulls.
A fresh round of US sanctions against Russia over its suspected role in a spy poisoning case in the UK and Moscow’s alleged meddling in the US presidential elections brought a third wave of tremors in the financial markets, which have not yet subsided.
This week, talk of a US missile strike against Syria in response to a chemical weapons attack in the country last Saturday and the spectre of it triggering a wider conflict in the Middle East region jolted equities, oil as well as gold.
In the meantime, the approaching May 12 deadline for President Donald Trump to extend the waiver of US sanctions against Iran promises to keep oil market players on the edge of their seats.
Secretary of State nominee Mike Pompeo, a presumed Iran hardliner, signalled a moderate stance on the nuclear deal in his confirmation hearing in the US Senate this week. That may whittle down some of the fear premium in crude but is not substantial enough for the market to revise its base-case scenario on the Iran deal just yet, especially with Iran hawk John Bolton starting his tenure as National Security Advisor April 9.
Oil market fundamentals remain strong and rebalancing is firmly underway. The latest monthly oil market reports this week from OPEC and the Parisbased International Energy Agency confirmed that view. Both reported a resumption of decline in OECD oil stocks in February after a small build in January and OPEC supply shrinking to its lowest level in several months in March. OPEC as well as the IEA maintained a robust oil demand growth outlook for 2018 despite the recent turbulence in global trade and geopolitics. In short, the reports had plenty of grist for the oil bulls.
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In the last week, global crude oil price benchmarks have leapt up by some US$5/b. Brent is now in the US$66/b range, while WTI maintains its preferred US$10/b discount at US$56/b. On the surface, it would seem that the new OPEC+ supply deal – scheduled to last until April – is working. But the drivers pushing on the current rally are a bit more complicated.
Pledges by OPEC members are the main force behind the rise. After displaying some reticence over the timeline of cuts, Russia has now promised to ‘speed up cuts’ to its oil production in line with other key members of OPEC. Saudi Arabia, along with main allies the UAE and Kuwait, have been at the forefront of this – having made deeper-than-promised cuts in January with plans to go a bit further in February. After looking a bit shaky – a joint Saudi Arabia-Russia meeting was called off at the recent World Economic Forum in Davos in January – the bromance of world’s two oil superpowers looks to have resumed. And with it, confidence in the OPEC+ club’s abilities.
Russia and Saudi Arabia both making new pledges on supply cuts comes despite supply issues elsewhere in OPEC, which could have provided some cushion for smaller cuts. Iranian production remains constrained by new American sanctions; targeted waivers have provided some relief – and indeed Iranian crude exports have grown slightly over January and February – but the waivers expire in May and there is uncertainty over their extension. Meanwhile, the implosion in Venezuela continues, with the USA slapping new sanctions on the Venezuelan crude complex in hopes of spurring regime change. The situation in Libya – with the Sharara field swinging between closure and operation due to ongoing militant action – is dicey. And in Saudi Arabia, a damaged power repair cable has curbed output at the giant 1.2 mmb/d Safaniuyah field.
So the supply situation is supportive of a rally, from both planned and unplanned actions. But crude prices are also reacting to developments in the wider geopolitical world. The USA and China are still locked in an impasse over trade, with a March 1 deadline looming, after which doubled US tariffs on US$200 billion worth of Chinese imports would kick in. Continued escalation in the trade war could lead to a global recession, or at least a severe slowdown. But the market is taking relief that an agreement could be made. First, US President Donald Trump alluded to the possibility of pushing the deadline by 2 months to allow for more talks. And now, chatter suggests that despite reservations, American and Chinese negotiators are now ‘approaching a consensus’. The threat of the R-word – recession – could be avoided and this is pumping some confidence back in the market. But there are more risks on the horizon. The UK is set to exit the European Union at the end of March, and there is still no deal in sight. A measured Brexit would be messy, but a no-deal Brexit would be chaotic – and that chaos would have a knock-on effect on global economies and markets.
But for now, the market assumes that there must be progress in US-China trade talks and the UK must fall in line with an orderly Brexit. If that holds – and if OPEC’s supply commitments stand – the rally in crude prices will continue. And it must. Because the alternative is frightening for all.
Factors driving the current crude rally:
Already, lubricant players have established their footholds here in Bangladesh, with international brands.
However, the situation is being tough as too many brands entered in this market. So, it is clear, the lubricants brands are struggling to sustain their market shares.
For this reason, we recommend an impression of “Lubricants shelf” to evaluate your brand visibility, which can a key indicator of the market shares of the existing brands.
Every retailer shop has different display shelves and the sellers place different product cans for the end-users. By nature, the sellers have the sole control of those shelves for the preferred product cans.The idea of “Lubricants shelf” may give the marketer an impression, how to penetrate in this competitive market.
The well-known lubricants brands automatically seized the product shelves because of the user demand. But for the struggling brands, this idea can be a key identifier of the business strategy to take over other brands.
The key objective of this impression of “Lubricants shelf” is to create an overview of your brand positioning in this competitive market.
A discussion on Lubricants Shelves; from the evaluation perspective, a discussion ground has been created to solely represent this trade, as well as its other stakeholders.Why “Lubricants shelf” is key to monitor engine oil market?
The lubricants shelves of the overall market have already placed more than 100 brands altogether and the number of brands is increasing day by day.
And the situation is being worsened while so many by name products are taking the different shelves of different clusters. This market has become more overstated in terms of brand names and local products.
You may argue with us; lubricants shelves have no more space to place your new brands. You might get surprised by hearing such a statement. For your information, it’s not a surprising one.
Regularly, lubricants retailers have to welcome the representatives of newly entered brands.
And, business Insiders has depicted this lubricants market as a silent trade with a lot of floating traders.
On an assumption, the annual domestic demand for lubricants oils is around 100 million litres, whereas base oil demand around 140 million litres.
However, the lack of market monitoring and the least reporting makes the lubricants trade unnoticeable to the public.
Headline crude prices for the week beginning 11 February 2019 – Brent: US$61/b; WTI: US$52/b
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