Trump Phone Call Reports Surprise Oil Experts | Rigzone
During this period of social distancing, communications via telephone, email, text, videoconferencing – anything that keeps people away from each other – have garnered more attention than normal. A series of reported phone calls this week caught the attention of the oil market, not to mention that of informed market-watchers interviewed by Rigzone. Keep reading to find out more about the Rigzone panel’s impressions of these socially distanced communications.
Rigzone: What were some market expectations that actually occurred during the past week – and which expectations did not?
Tom Seng, Assistant Professor of Energy Business at University of Tulsa’s Collins College of Business: The (U.S. Department of Energy’s) Weekly Petroleum Status Report had a much larger-than-expected increase in commercial crude inventory. Refinery utilization also fell, possibly as a result of a combination of lower gasoline demand and seasonal turnaround. And, U.S. oil production for the week ending March 27 showed that we are still averaging 13 million barrels per day (bpd). We would’ve expected output to have fallen.
Andrew Goldstein, President, Atlas Commodities LLC: As the cases of COVID-19 increase in the U.S., the demand for oil had decreased, as shown with a build of 138.83 million crude barrels and 7.524 million gasoline. I believe the build was already priced into the market, as we saw a low in crude oil of below $20 and $0.53 in RBOB gasoline.
Steve Blair, Senior Account Executive, RCG Division of Marex Spectron: The non-surprise is that the weekly U.S. petroleum statistics finally showed that the demand destruction that has been occurring since the start of the global coronavirus pandemic is in the stats and that the markets had mostly a non-reaction as this demand destruction had already been priced into the market. As well, and as expected, the demand destruction in the U.S. appears most glaring in the gasoline sector as the U.S. approaches the high-peak-demand season. It is also not a surprise that both the Saudis and the Russians want to do damage to the U.S. shale sector so that they can retain back market share when this situation comes to pass, with both nations returning to production supremacy.
Rigzone: What were some market surprises?
Blair: The surprise in the market came today (Thursday) when President Trump tweeted that he had spoken with the Saudi crown prince and indicated that prince had a conversation with President Putin of Russia and that they would cut production by 10 million bpd or more. Seems to be the cart before the horse as the Kremlin later denied any such conversation between the Saudis and the Russians. However, it may be likely that they did have a conversation as Bloomberg reported a little while ago (Thursday afternoon) that the two nations have not agreed on anything yet, according to an OPEC+ delegate. It appears that the Saudis ant more than just the OPEC+ nations to join in on production cuts, but Bloomberg also reported that President Trump is not planning on asking U.S. oil companies when he meets with U.S. producers and refiners on Friday. Dow Jones reported earlier that the Saudis would cut to 9 million bpd if other nations joined in production cuts. The surprise here is whether anything at all will be accomplished at this juncture.
Seng: Trump’s announcement that he had spoken to both Russian President Putin and Saudi Crown Prince Muhammad bin Sultan about curtailing oil output.
Goldstein: The telephone conversation between President Trump and Russian President Vladimir Putin had a profound effect on the energy markets. Putin agreed on the “importance of stability in global energy markets.” According to Trump, Russia and Saudi Arabia are going to “get together to see what they can do.” As I write this (Friday morning), the two countries are speaking about a 6 million-bpd cut in production to boost prices.
Campbell Faulkner, Senior Vice President, Chief Data Analyst, OTC Global Holdings: A large surprise over the past few days was the announcement of a potential for U.S. and OPEC+ cooperation. This largely doesn’t seem feasible due to the lack of proper unitization and the ability for small producers to defer from participation. If the U.S. government began to act like the Railroad Commission of Texas (RRC) of old, it would truly be a new and unusual proposition which would likely end up being adjudicated via the (U.S.) Supreme Court. But, overall, any glimmer of hope in the oil market is truly welcomed by producers and those watching gross U.S. employment numbers.
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