Recently, oil has been in a steady decline amid demand for demand in China, but is that all that drives the price?
1. The first problem with oil is that the market is oversupplied, despite OPEC + efforts to keep the price high.
2. Despite the free fall of oil over the past weeks, Russia has not yet taken action to cut it and is holding OPEC in expectation of declining its output by 600K barrels per day. To be profitable, Russia needs a minimum of $ 40 per barrel, which suggests that current prices would force Russia to shrink yields only if it showed goodwill. This is not the case in Saudi Arabia, where a price of $ 80 is the minimum that will not hurt the budget. This suggests that the next Cut will come from there.
3. The closure of ports in eastern Libya is indeed appropriate. Libya currently produces around 180,000 barrels per day against a normal production level of 1.2 million. So, be careful. The Libyan crisis is currently supporting oil prices, but if ports suddenly open, we can expect another sharp drop.
4. Coronavirus – The larger the coronavirus outbreak, the worse it is for oil prices. China is the largest oil importer in the world, with about 11 million barrels per day. Currently, Chinese data shows that China’s oil demand has dropped by 1 to 3 million barrels per day.
5. The oil data we expect today! At 13:00 today we expect the OPEC monthly report, which will include official China search data. It will be interesting to see how OPEC projects the demand for coronavirus-influenced oil, so consider the volatility that is expected. At 17:30 we also expect US oil reserves, which, given expectations and foundation, would not have a major impact.
Trader Petar Milanov