Oil Market Hits and Misses for the Week
Oil industry veterans likely recall the dark days of the mid-1980s oil bust. One market-watcher told Rigzone that he sees a parallel during the current slump. Keep reading for his and other panelists’ insights about oil market events from the past week.
Rigzone: What were some market expectations that actually occurred during the past week – and which expectations did not?
Campbell Faulkner, Senior Vice President, Chief Data Analyst, OTC Global Holdings: The market for crude oil this week was not only insane, it demonstrated that there is significant doubt about total demand and the continued stability of pricing and volume. The oil complex is currently facing a crisis that hasn’t been seen since the 1986 oil crash caused by the Saudi regime increasing production (along with Warsaw Pact increased Western market access). The up-and-down regime this week is indicative of market participants attempting to find bottom yet still very uncertain down the curve.
Andrew Goldstein, President, Atlas Commodities LLC: With COVID-19 affecting more industries than originally thought, and Saudi Arabia flooding the market with inexpensive oil, both the supply and demand for oil and refined products has been greatly impacted. In addition, we’ve seen Goldman Sachs slash its (Brent second-quarter) forecast for the second time in two weeks, this time down from $30 to $20. We’ve seen the effects with a 20-percent decrease in the price of crude oil and a 24-percent decrease in the price of gasoline this week.
Steve Blair, Senior Account Executive, RCG Division of Marex Spectron: As we all know the petroleum markets continue to remain under the influence of the coronavirus and the subsequent effects of the
Saudi/Russian price war. Let’s not be fooled that this price war is only due to the Russians not wanting to cut production further. Shale drillers were resistant to this same ploy by the Saudis the last time; however, this time many continue to be saddled with debt which may prove to be too much this time around should prices continue to linger at current price levels. Companies such as Halliburton and Baker Hughes are feeling the effects already.
Rigzone: What were some market surprises?
Goldstein: With energy prices collapsing and the world in turmoil, the expectation would be for gold and silver prices to rise. The reality is gold is down 2.4 percent week-to-date and silver 16 percent. The apprehension of investors in all financial markets is prevailing as they stand on the sidelines.
Blair: The U.S. government has reportedly made some overtures to the Saudis, but nothing of substance has been reported to the public. But doesn’t it seem unusual that President Trump would allow the Saudis to make such blatant moves toward the U.S. without some sort of retribution, particularly with the U.S. being their staunchest ally and friend?
Faulkner: While the storage play appears to be “in vogue” given the steep contango in the forward curve, rational expectations for the market are much less sanguine due to lagging effects of the Wuhan virus.
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