Friday Five: What's moving oil markets this week

Friday Five: What's moving oil markets this week

GEOPOLITICS

President Donald Trump suddenly fired his national security advisor John Bolton this week, allegedly due to disagreements over how to handle changes to foreign policy.

Bolton was the third national security adviser under the Trump administration, and a key figure in the government's tough stance against Iran. According to Bloomberg, Bolton was reportedly unhappy with talks of easing sanctions, and potentially meet with Iranian President Rouhani later this month.

US DOLLAR

After hitting an 2½-year high at the beginning of September, the US Dollar Index posted its second week of declines on Friday, falling about 0.5%, to end the week just below 98.

DEMAND

Wood Mackenzie cut its oil demand growth forecast to 700,000 bbl/day this year, down from its previous forecast of up to 900,000 bbl/day, blamed on slower economic growth brought on by poor US-China trade relations.

Goldman Sachs lowered its 2019 demand forecast by 100,000 bbl/day to 1 million bbl/day, due to softer demand out of India, China, the Middle East and Latin America. The firm left its 2020 growth forecast unchanged at 1.4 million bbl/day.

The EIA also noted earlier this week that global oil demand growth will likely fall below 1 million bbl/day this year, a first since 2011.

SUPPLY

OPEC members produced an estimated 29.74 million bbl/day in August, up 136,000 bbl/day from the previous month, due to higher output from Saudi Arabia, Iraq and Nigeria.

At this week's joint monitoring committee meeting, the cartel says Iraq and Nigeria have agreed to reduce output according to their prescribed quota. That could potentially take another 230,000 bbl/day off oil markets.

OPEC also cut its 2020 non-OPEC supply growth forecast to 2.25 million bbl/day next year, 136,000 bbl/day less that its previous forecast, due to a "large" downward revision in projected US oil supply.

In its September Oil Market Report, the International Energy Agency (IEA) warns that global output is still "growing strongly," particularly out of the US, Norway and Brazil. According to IEA estimates, oil markets will see a "significant surplus" of 1.4 million bbl/day next year.

The Energy Information Administration (EIA) left its 2019 and 2020 US oil ouput forecast roughly unchanged at 12.2 and 13.2 million bbl/day, respectively. Total US crude output was reported unchanged last week, at an estimated 12.4 million bbl/day.

SENTIMENT

Crude benchmarks all moved lower this week, to the tune of about 3%. After falling through much of the spring, oil prices have been trading sideways since the beginning of August.

As of early last week, net longs have moved up considerably on both Brent and WTI managed money contracts, as traders boost long positions and trim shorts.

Synthetic crude hits a record high in July

Synthetic crude hits a record high in July