Oil Price War-A Triggerfor Price Amidst Weak Demand; Stimulus Hope Upticks Oil

The oil war is intensifying between Saudi and Russia post both the countries did not reach to a decisive conclusion related to the deepening the production cut. The ongoing pricing war between them along with weaker demand for oil in the wake of the coronavirus outbreak is putting significant pressure on oil, with Brent crude oil futures (CFD) slipping from its recent top of USD 53.90 a barrel (intraday high on 3 March 2020) to the present low of USD 24.52 per barrel (intraday low on 18 March 2020), which marked a price fall of ~ 54.50 per cent.

While the oil war between the oil giants is taking further roots, various analysts and independent forecasters assess that there would be no production control over the coming period, which makes it difficult to measure the inventory surplus ahead; thus, indicating towards higher volatility and event-driven price movement ahead.

The United States Energy Information Administration assesses that the OPEC shift towards the market share would build global oil inventory, which, coupled with weak demand, would further weak the prices ahead.

OPEC to shoot for higher market share, production to remain unmeasured

As per the EIA estimation, the OPEC crude oil production would reach to an average of 29.2 million barrels per day from April to December 2020, slightly up, against the average production of 28.7 million barrels per day during the first quarter of the year 2020.

• The OPEC production is further estimated to surge to average at 29.4 million barrels per day in 2021.
• While the global oil inventory has been estimated to surge in the wake of higher and unmeasured production from OPEC to gain the market share, EIA estimates that the global petroleum and liquid fuels consumption would fall by 0.9 million barrels a day in Q1 CY2020 against the previous corresponding year to average at 99.1 million barrels a day.
• The global liquid fuel inventories are estimated to average at 1.0 million barrels a day in 2020, down by 0.1 million barrels a day, in the wake of weaker oil demand, global refineries are expected to scale back production.
• However, over the short-term, the global liquid fuel inventories are projected to build at a rate of 1.7 million barrels a day during the first half of the year 2020 in the wake of lower consumption.

Also Read: Crude Oil Takes A Breather As U.S. Refineries Increase Imports Amid Declining Product Inventory

While both, Russia and Saudi are into a tug-of-war for the market share, the United States is urging them to end the pricing war as it is now hurting oil producers across the United States amid the falling prices.

The United States Weekly Oil Trade

The weekly oil imports across the United States fell for the week ended 20 March 2020, down by ~ 0.4 million barrels per day against the previous week to stand at 6.1 million barrels per day, while overall export slumped ~12.06 per cent against previous week to stand at 3,850 thousand barrels a day.

While the total imports surged and exports fell, the refineries oil input across the United States surged at an average of 15.8 million barrels a day (for the week ended 20 March 2020), up by 18,000 barrels per day against the previous week, which coupled with lower imports reflected the consumption of higher domestic oil.

Over the past four weeks, the total oil import averaged about 6.3 million barrels a day, which remained down by 7.0 per cent against the previous corresponding period.

The United States Production at a Peak of 13 Million Barrels a Day

The United States President- Donald Trump had time and again reminded the market concerning overvalued oil prices, which has impacted many businesses across different geographies via leading to a higherbusiness cost. However, the OPEC never broke a sweat over the same.

In the recent times, the increased oil exploration and production activities across the U.S., which holds a significant amount of oil reserves, propelled the nation to stand as the largest oil supplier and producer outside OPEC boundaries with production reading a top of 13.0 million barrels a day in late 2019.

While there has been a decline in the production from the top of 13.0 million barrels a day, the United States is till now able to uphold the peak production level, which as per the estimation from EIA would further increase ahead.

Also Read: U.S. Contours All-Time High Oil Production; Libya Supply Constraints Subdued

As Saudi, Russia, and the United States are aiming for higher production, the oil market is expected to remain thoroughly demand-driven amidst the supply glut, and presently, the demand has taken a toll from the coronavirus outbreak.

However, in the status quo,the United States Federal Reserve, the Senate, and the Trump Administration are taking some unprecedented measures to counter the economic slowdown, which, over a short-term could yield to a positive oil move, but investors should remain cautious in pulling any trigger.

To Know More, Do Read: Base Metals Out of Woods Poised for an Overnight Spike or Risk of Another Sell-off Remains?

In the wake of stimulus hope, the oil market has shown a slight up move during the opening session across the global front, with Brent crude oil futures (CFD) rising from USD 27.04 (as on 27 March 1:50 PM AEDT), up by 0.18 per cent against its previous close.

Disclaimer

This website is a service of Kalkine Media Pty. Ltd. A.C.N. 629 651 672. The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine Media does not in any way endorse or recommend individuals, products or services that may be discussed on this site. Our publications are NOT a solicitation or recommendation to buy, sell or hold. We are neither licensed nor qualified to provide investment advice.