Friday Five: What's moving oil markets this week
1 GEOPOLITICS — Renewed fighting in Libya raised concerns of more supply disruptions this week, after the Libyan National Army seized control of oil fields on the south side of the country. The chairman of Libya's National Oil Company says the situation could potentially be much worse than 2011, putting as much as 1.2 million bbl/day of crude at risk of coming offline.
2 SUPPLY — In this month’s Oil Market Report, OPEC says output from the cartel dropped by 534,000 bbl/day in March, to about 30 million bbl/day. Venezuelan output sank to a new low of 960,000 bbl/day, thanks to US sanctions and widespread power outages. Meanwhile over in Saudi Arabia, the kindgom has now reduced output by almost 500,000 bbl/day since January, bringing total production to its lowest level in two years. Earlier in the week, a senior Russian official threatened to terminate the country's pact with OPEC due to an "improving market situation." Russia may boost output as early as June.
3 DEMAND — The International Monetary Fund (IMF) cut its global growth forecast from 3.5% to 3.3% this year, mostly due to downward revisions for several OECD countries. OPEC echoed a similar sentiment, lowering its 2019 world oil demand growth forecast from 1.24 to 1.21 million bbl/day. The IEA warned OECD demand contracted in Q4/18, the first decline in four years, while another drop is expected in Q1/19, mainly due to higher gas prices in the EU. Total world oil demand is still expected to top 100 million bbl/day sometime by the end of this summer.
4 US DOLLAR — The greenback continues to go nowhere, ending the week at about 96.5, down 0.5% from the previous week.
5 SENTIMENT — The trend continues to be your friend in oil markets, with most major benchmarks posting solid gains for the week. WTI has now logged six consecutive weeks of gains, a first since the beginning of 2016. Contango has almost disappeared for the US benchmark, as oversupply eases in North American markets. Traders added long positions and reduced shorts once again this week, for both Brent and WTI.