Oil Traders Struggle to Make up Minds
Tuesday found oil traders struggling to make up their minds on how to interpret the result of the previous day’s OPEC+ meeting.
That’s what Rystad Energy’s head of oil markets, Bjornar Tonhaugen, said in a statement sent to Rigzone today, adding that prices have swung from gains to losses and back to gains.
“Members said that they will do what is needed if the situation requires, that they would do whatever it takes,” Tonhaugen said in the statement.
“But are words providing a relief on their own? No, action is needed and the lack of it is the reason that prices are not seeing any meaningful increase today,” he added.
According to Tonhaugen, uncertainty is now the word and until new demand indicators signal a direction, he believes prices are not likely to move significantly.
“Another reason for uncertainty is the outcome of the coming U.S. election, as the two candidates have conflicting plans for the future of energy,” Tonhaugen stated.
“The election is around the corner and it could also have consequences for foreign policy depending on the results. This uncertainty is probably also a reason that OPEC+ chose to wait rather than take an early decision to continue the current deep cuts into 2021,” he added.
“Furthermore, markets are still left guessing if the U.S. stimulus negotiations will bear fruit today before Nancy Pelosi’s self-imposed deadline,” Tonhaugen went on to say.
The Rystad Energy representative highlighted that a stimulus deal would be a positive surprise for markets and could also support oil prices if confirmed.
“It seems unlikely though as the presidential candidates are preoccupied with preparing for the final debate on Thursday ahead of the elections,” Tonhaugen said.
Tonhaugen outlined that the next thing on oil traders’ calendars is how U.S. oil stocks were altered last week. Should there be a build on crude stocks, this will be a warning sign that supply is overflowing again because demand can’t take more oil, he noted. If we see draws prices could rise on confidence about the market’s resilience, Tonhaugen said.
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