WIN-WIN OPEC – OIL LOOKING NORTH ?!

WIN-WIN OPEC – OIL LOOKING NORTH ?!

What if I say that OPEC meeting in Vienna is like tossing a coin with both outcomes having the same impact on the Oil market!

Lets quickly see what scenarios could happen in OPEC meeting tomorrow, 22 Jun 2018 –

1. Status Quo – No Change and OPEC cut is continued

Though is NOT what Saudi and Russia is preaching to the rest of world, but it could be a consensus. Result refiners continues to draw barrels, Venezuela and Iran have their own problems producing more over next few months and then the market looks up to US to fill the gap. But mind it US is facing problems in evacuations of Crude from their producing basins to the export outlets due to pipeline shortages. There also has been talks about some of the operators thinking to take off rigs due to evacuation/ storage issues.

Result – Market suddenly starts looking tighter and oil prices are likely to move up.

2.Production is brought back by OPEC and Russia – 500-1000kbd(OPEC) and 100-400kbd(Russia)

This though looks like easing the market of the supply situation, might initially have some cooling effect on the prices (very short term) but eventually the available belittled Spare capacity for OPEC would start creeping in as a concern. Any oil rig out would mean tighter oil supply scenario. US anyways is struggling with exports.

Result – Market again starts looking tighter and instead of the prices going south as everyone would expect, we see it moving up.

3. Third Scenario – OPEC taking deeper Cuts is Ruled out

 

SO WAIT FOR IT! NOTHING IS GOING TO CHANGE IN THIS OPEC MEETING….IF ANYTHING, HIGHER CRUDE LOOKS CLOSER THAN BEFORE…. AND ALWAYS REMEMBER WHO IS GAINING WITH HIGH PRICES !!

Source: Desk View based on Various Market Data

Debmalya Roy
Lead – Derivatives
Swiss Singapore Overseas Enterprises

 

 

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