Friday Five: What's moving oil markets this week
1 GEOPOLITICS — The Trump Administration has decided not to renew waivers for buyers of Iranian crude, potentially removing another 1M bpd from world oil markets. Last November, the US granted 6-month exemptions to 8 countries, including Iran's largest buyers — China and India. The US is threatening stiff penalties for anyone caught buying Iranian crude after May 1st.
2 SUPPLY — The International Energy Agency says world oil markets are "well supplied," with or without Iran. In addition to the US, Russia and Saudi Arabia, Iraq has graciously offered to boost oil output by as much as 1.5M bpd, to make up for any lost Iranian barrels. In the US, oil rig counts tumbled sharply this week, falling by 20 to 805. Despite the decline, US crude output has been holding steady at 12.2M bpd this month. In Venezuela, production continues to deteriorate, estimated to have fallen to 840,000 bpd in March, the lowest since Jan 2003.
3 DEMAND — No new news on the demand front this week.
4 US DOLLAR — The US dollar touched a 2-year high this week, clearing 98 for the first time since May 2017. The greenback retreated slightly on Friday, but still ended the week up 0.6%.
5 SENTIMENT — Backwardation has steepened on Brent, suggesting that global oil markets are undersupplied in the short-term. Money managers also remain extremely bullish, adding new long contracts on both Brent and WTI last week. Brent squeaked out a fifth consecutive week of gains, while WTI posted its first weekly loss since early March.