{"id":1000,"date":"2020-10-29T13:37:57","date_gmt":"2020-10-29T13:37:57","guid":{"rendered":"https:\/\/campus.hesge.ch\/commodity-trading\/?p=1000"},"modified":"2020-10-30T08:24:38","modified_gmt":"2020-10-30T08:24:38","slug":"oil-market-uncertainties-covid-19-the-american-elections-and-the-asian-economy-gulf-oil-weekly-bulletin-1","status":"publish","type":"post","link":"https:\/\/campus.hesge.ch\/commodity-trading\/oil-market-uncertainties-covid-19-the-american-elections-and-the-asian-economy-gulf-oil-weekly-bulletin-1\/","title":{"rendered":"Oil market uncertainties: Covid-19, the American elections and the Asian economy &#8211; Gulf oil &#8211; Weekly bulletin #1"},"content":{"rendered":"\n<h2><u><strong><em><span class=\"has-inline-color has-white-color\">Price movement recap<\/span><\/em><\/strong><\/u><\/h2>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" width=\"810\" height=\"494\" src=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre.png\" alt=\"\" class=\"wp-image-1001\" srcset=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre.png 810w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-300x183.png 300w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-768x468.png 768w\" sizes=\"(max-width: 767px) 89vw, (max-width: 1000px) 54vw, (max-width: 1071px) 543px, 580px\" \/><figcaption><em><strong>Price is in USD \/ Barrel<\/strong><\/em><\/figcaption><\/figure>\n\n\n\n<p>The violent sell off we have just been through this week and at the end of September is very correlated with the negative \u2018narrative\u2019:<\/p>\n\n\n\n<ul><li>China has loosely mentioned a net carbon neutral target by 2060.<\/li><li>Joe Biden\u2019s likely victory leading to the \u2018imminent return of Iran\u2019 and a 2<sup>nd<\/sup> push for renewable energies contributed to push the oil price down.<\/li><\/ul>\n\n\n\n<p>Looking at 2021, China is planning to double its net import coverage through SPR (strategic petroleum reserves). &nbsp;This positive news is not sufficiently important to push the oil price up but it provides support to maintain price levels. moment.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" width=\"588\" height=\"436\" src=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-2.png\" alt=\"\" class=\"wp-image-1002\" srcset=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-2.png 588w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-2-300x222.png 300w\" sizes=\"(max-width: 588px) 100vw, 588px\" \/><figcaption><strong><em>Price is in USD \/ Bar<\/em><\/strong><em><strong>rel<\/strong><\/em><\/figcaption><\/figure>\n\n\n\n<p><em>Futures prices \/ Cost Curves:<\/em><\/p>\n\n\n\n<p>The Gulf Oil market is in contango as shown in the 1<sup>st<\/sup> graph below. Due to the Covid-19, supply remains higher than demand which increases the premium (storage+financing).<\/p>\n\n\n\n<p>On the 2<sup>nd<\/sup> graph dated 3 weeks ago, the contango situation was similar.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" width=\"812\" height=\"430\" src=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-3.png\" alt=\"\" class=\"wp-image-1003\" srcset=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-3.png 812w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-3-300x159.png 300w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-3-768x407.png 768w\" sizes=\"(max-width: 767px) 89vw, (max-width: 1000px) 54vw, (max-width: 1071px) 543px, 580px\" \/><\/figure>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" width=\"814\" height=\"482\" src=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-4.png\" alt=\"\" class=\"wp-image-1004\" srcset=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-4.png 814w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-4-300x178.png 300w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-4-768x455.png 768w\" sizes=\"(max-width: 767px) 89vw, (max-width: 1000px) 54vw, (max-width: 1071px) 543px, 580px\" \/><\/figure>\n\n\n\n<h2><strong><u>Supply and demand dynamic<\/u><\/strong><strong><u><\/u><\/strong><\/h2>\n\n\n\n<p>As you can see on the graph, OPEC&#8217;s crude oil production has decreased significantly as a result of the pandemic. However, there has been a small increase thanks to the return of the largest Libyan field.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" width=\"448\" height=\"300\" src=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-5.png\" alt=\"\" class=\"wp-image-1005\" srcset=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-5.png 448w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-5-300x201.png 300w\" sizes=\"(max-width: 448px) 100vw, 448px\" \/><\/figure>\n\n\n\n<p>Demand declined in the second quarter of 2020 due to Covid-19. Because of confinement, the petrol consumption decreased (cars and planes). At the same period last year, the demand was higher by 0.7 mb\/d.<\/p>\n\n\n\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" width=\"426\" height=\"324\" src=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-6.png\" alt=\"\" class=\"wp-image-1006\" srcset=\"https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-6.png 426w, https:\/\/campus.hesge.ch\/commodity-trading\/wp-content\/uploads\/2020\/10\/Sans-titre-6-300x228.png 300w\" sizes=\"(max-width: 426px) 100vw, 426px\" \/><\/figure>\n\n\n\n<p>In our opinion, the decrease in demand will continue due to the 2<sup>nd<\/sup> virus wave and the new measures to counter the virus spread.<\/p>\n\n\n\n<p>On the positive side, we see that Asian oil demand is coming back, which is expected to be a major catalyst in Q4. Physical markets are strengthening there because Covid-19 is better controlled and an economical takeover is expected.<\/p>\n\n\n\n<div class=\"wp-block-group\"><div class=\"wp-block-group__inner-container\">\n<h2><strong><em>Recommendations<\/em><\/strong><\/h2>\n<\/div><\/div>\n\n\n\n<p>As shown above, the oil market is in contango. From an investment perspective, we recommend being long for the next 3 to 6 months. We think that due to the pandemic, the demand will remain low, especially during the 2<sup>nd<\/sup> wave in which we are currently in. The oversupply increases the storage costs and raise the today\u2019s contractually agreed prices for future deliveries. The unbalance between supply and demand, currently in favor of supply, creates a situation in which investors should be long.<\/p>\n\n\n\n<p class=\"has-text-align-right\"><strong>Abbas Al-Azawi<\/strong><\/p>\n\n\n\n<p class=\"has-text-align-right\"><strong>Alexis Baeriswyl<\/strong><\/p>\n\n\n\n<p class=\"has-text-align-right\"><strong>Valery Sikorskiy<\/strong><\/p>\n\n\n\n<h2><strong><em>References<\/em><\/strong><\/h2>\n\n\n\n<p class=\"has-small-font-size\">BOURSE, Zone, [no date]. P\u00c9TROLE BRENT (LONDON BRENT OIL)\u202f: Graphique de Cours Comparatif | XBNT | XX00000BRENT | Zone bourse. [online]. [Viewed&nbsp;28&nbsp;October&nbsp;2020]. Available from: https:\/\/www.zonebourse.com\/cours\/matiere-premiere\/LONDON-BRENT-OIL-4948\/graphiques-comparatif\/<\/p>\n\n\n\n<p class=\"has-small-font-size\">Dubai Crude Oil (Platts) Financial Futures Quotes &#8211; CME Group, [no date]. [online]. [Viewed&nbsp;27&nbsp;October&nbsp;2020]. Available from: https:\/\/www.cmegroup.com\/content\/cmegroup\/en\/trading\/energy\/crude-oil\/dubai-crude-oil-calendar-swap-futures.html<\/p>\n\n\n\n<p class=\"has-small-font-size\">Le p\u00e9trole r\u00e9cup\u00e8re au lendemain d\u2019une forte chute, 2020. <em>Allnews<\/em> [online]. [Viewed&nbsp;27&nbsp;October&nbsp;2020]. Available from: https:\/\/www.allnews.ch\/content\/march%C3%A9s\/le-p%C3%A9trole-r%C3%A9cup%C3%A8re-au-lendemain-d%E2%80%99une-forte-chute<\/p>\n\n\n\n<p class=\"has-small-font-size\">London open: Hopes for oil reprieve on reports of China SPR buy-up, [no date]. <em>FXStreet<\/em> [online]. [Viewed&nbsp;27&nbsp;October&nbsp;2020]. Available from: https:\/\/www.fxstreet.com\/analysis\/london-open-hopes-for-oil-reprieve-on-reports-of-china-spr-buy-up-202004020828<\/p>\n\n\n\n<p class=\"has-small-font-size\">SHEPPARD, David, 2020. Oil traders braced for balancing act in wake of US election. [online]. 27 October 2020. [Viewed&nbsp;28&nbsp;October&nbsp;2020]. Available from: https:\/\/www.ft.com\/content\/00f63355-c1fa-4cf8-ad18-450c12440106<\/p>\n\n\n\n<p class=\"has-small-font-size\">This Week in Petroleum, [no date]. [online]. [Viewed&nbsp;29&nbsp;October&nbsp;2020]. Available from: https:\/\/www.eia.gov\/petroleum\/weekly\/<\/p>\n\n\n\n<p class=\"has-small-font-size\">Westbeck Capital Management LPP, 2020. Monthly Newsletter [medium]. London: Westbeck Capital, september 2020.<\/p>\n\n\n\n<p class=\"has-small-font-size\">Organization of the Petroleum Exporting Countries, 2020. OPEC Monthly Oil Market Report [online]. Vienna: OPEC, 13 october 2020. Available from: https:\/\/www.opec.org\/opec_web\/en\/publications\/338.htm<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Price movement recap The violent sell off we have just been through this week and at the end of September is very correlated with the negative \u2018narrative\u2019: China has loosely mentioned a net carbon neutral target by 2060. Joe Biden\u2019s likely victory leading to the \u2018imminent return of Iran\u2019 and a 2nd push for renewable &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/campus.hesge.ch\/commodity-trading\/oil-market-uncertainties-covid-19-the-american-elections-and-the-asian-economy-gulf-oil-weekly-bulletin-1\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;Oil market uncertainties: Covid-19, the American elections and the Asian economy &#8211; Gulf oil &#8211; Weekly bulletin #1&#8221;<\/span><\/a><\/p>\n","protected":false},"author":2095,"featured_media":0,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[3,6],"tags":[],"_links":{"self":[{"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/posts\/1000"}],"collection":[{"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/users\/2095"}],"replies":[{"embeddable":true,"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/comments?post=1000"}],"version-history":[{"count":9,"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/posts\/1000\/revisions"}],"predecessor-version":[{"id":1045,"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/posts\/1000\/revisions\/1045"}],"wp:attachment":[{"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/media?parent=1000"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/categories?post=1000"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/campus.hesge.ch\/commodity-trading\/wp-json\/wp\/v2\/tags?post=1000"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}