Thursday, March 18, 2021

Oil Sinks To Lowest This Month On U.S. - Russia Tension, Rising Inventory -- SeekingAlpha -- March 18, 2021

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March 19, 2021: see comments --

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Crude oil futures plunged more than 5% in their biggest intraday loss since December, 2020, with some analysts citing concerns over rising tensions between the U.S. and Russia.

April WTI crude fell 5.8% to $60.85/bbl and May Brent fell 5.5% to $64.23/bbl, both hitting at least two-week lows.

The fifth day of declines for both contracts also marks the longest losing streak for WTI since February 2020 and for Brent since September 2020.

"U.S.-Russia tensions are increasing, with the U.S. threatening sanctions on Russia," ... one way Russia could retaliate is to target shale producers by flooding the market with oil.

President Biden earlier this week essentially called Russian President Putin "a killer," prompting Russia to recall its ambassador to the U.S. for consultations.

Analysts say Europe's sluggish vaccine rollout also remains a weight on crude, raising questions about the speed of the recovery in demand.

"Even if the AstraZeneca vaccine recovers public confidence, this will likely not be the last inoculation issue to arise as countries race to vaccinate as many people as possible all while new mutations are constantly being discovered," says Rystad Energy analyst Louise Dickson.

Also, U.S. government data continues to show rising crude inventories after last month's Texas freeze forced shutdowns at refineries, and traders say stockpiles could grow further since WTI recently switched from backwardation to contango, where front-month oil is cheaper than the second-month.

"Contango is bearish because it encourages [firms to] store crude oil and sell it further down the curve at a profit," Mizuho's Bob Yawger says. 
And the latest report from the International Energy Agency said pre-pandemic global oil demand is unlikely to return for at least another two years.

Bad, bad news for Saudi Arabia. 

By the way, if you like predictions from agencies like the IEA, you will enjoy this from the Canadian Geological Survey in 2006

This is what should be concerning to fossil fuel energy bulls with regard to the US: no matter how you spin it, this is not encouraging.

4 comments:

  1. Shipwrecked article on Keystone lawsuit.

    https://redstate.com/shipwreckedcrew/2021/03/18/21-state-attorneys-general-chose-a-texas-federal-court-to-file-suit-against-the-biden-administration-regarding-keystone-xl-pipeline-n345480

    I would be cautious about SWC. He is smart about the mechanics of trial lawyering in Federal court. But has little perspective on pipelines and how obstructed. Also has a tendency to "wishcasting" (has been wrong versus Robert Barnes for this reason). All that said, interesting article.

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    1. Thank you. I posted a stand-alone post with this link so it will be seen by more readers and will be searchable.

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  2. i wouldn't be betting on a month or two of oil in contango; one might get stuck with it at a lower price a few months out into the future...

    in these urls of oil contract prices, the CL is for WTI, the letters are for the month, and the year is obvious..you can check contract prices out 20 years...

    https://www.barchart.com/futures/quotes/CLJ21/price-history/historical
    https://www.barchart.com/futures/quotes/CLK21/price-history/historical
    https://www.barchart.com/futures/quotes/CLR21/price-history/historical
    https://www.barchart.com/futures/quotes/CLJ23/price-history/historical

    that's $53 oil in two years...and also explains why they weren't drilling like crazy with $66 oil for April..

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    1. Much appreciated. Thank you.

      WTI monthly delivery codes:

      begin with "F" for January
      consecutive through Z for December
      omit I, L, O, P, R - T, W, Y.

      Delete