WEEKLY ENERGY RECAP: Oil price trends suggest OPEC+ output cuts having desired effect

WEEKLY ENERGY RECAP: Oil price trends suggest OPEC+ output cuts having desired effect
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Updated 12 July 2020

WEEKLY ENERGY RECAP: Oil price trends suggest OPEC+ output cuts having desired effect

WEEKLY ENERGY RECAP: Oil price trends suggest OPEC+ output cuts having desired effect
  • Brent crude oil nudged higher to end the week at $43.24 per barrel

Brent crude oil nudged higher to end the week at $43.24 per barrel as WTI also gained to $40.55. 

Oil prices have been moving in an extremely narrow band over the last two months of just $3-$4 and this week that band was squeezed further from dollars to cents.

Accordingly, the US Energy Information Administration (EIA) raised its price outlook for Brent crude to $41 per barrel for the second half of 2020, which is $4 per barrel higher than last month.

More importantly, the latest oil price trends confirm that historical output cuts made by OPEC+ are working to re-balance the market in the wake of the largest oil demand shock in history.

OPEC slashed its crude output in June to a three-decade low when it produced 22.31 million bpd, the organization’s lowest collective output since September 1990. 

These cuts appear to have achieved high compliance rates and have been largely responsible for keeping the market intact. 

But while consumers have benefited from market stability recently, the same cannot be said for speculators who love volatility.

Instead the hedge fund heads have been turned by airlines, cruise companies, banks and other sectors hard hit by the pandemic.

This won’t support upward movement in oil prices as sentiment remains bearish.

In the physical market, sour crude grades with high sulfur content are trading at prices getting closer to sweet barrels with low sulfur content. Crude grades with high sulfur content are showing signs of under-supply, with record premiums to Brent.

Coronavirus disease cases continue to rise in the US, a major threat to oil markets. 

Brent’s premium against Dubai has narrowed sharply this year and even flipped to a discount against Arabian Gulf crude grades for the first time in March.

At the same time, US shale prices linked to WTI remains relatively expensive.


Emirates stops flights to three major Australian cities

Emirates stops flights to three major Australian cities
Updated 16 January 2021

Emirates stops flights to three major Australian cities

Emirates stops flights to three major Australian cities
  • Flights to/from Sydney, Brisbane and Melbourne will be suspended until further notice: Emirates
  • The airline will still run two flights a week to Perth

DUBAI: Emirates has suspended flights to Australia's three largest cities as the country further restricts international arrivals over fears of new virus strains.
The Dubai-based carrier was one of the last to maintain routes into and out of the country's east coast throughout most of the pandemic but on Friday evening told travellers a handful of planned flights next week would be the last.
"Due to operational reasons, Emirates flights to/from Sydney, Brisbane and Melbourne will be suspended until further notice," Emirates said on its website.
The airline will still run two flights a week to Perth, but the cuts are another barrier for tens of thousands of stranded Australians still attempting to return home.
The Australian government responded by announcing more repatriation flights and said other carriers still flying services to the cities could fill the gap.
"The capacity that Emirates was able to use within the cap will be allocated to other airlines, ensuring that there are still as many tickets, as many seats available into Australia," Finance Minister Simon Birmingham said.
A small number of airlines - including Qatar Airways and Singapore Airlines - are still running services to Australia but local media were already reporting delays and cancellations among returning travellers.
Australia's borders have effectively been closed since March to curb the spread of the virus, with the government even limiting the number of citizens allowed to return.
Last week travel restrictions were further tightened, with arrival numbers slashed and all travellers into the country requiring a negative Covid-19 test before flying.
In making the changes, Prime Minister Scott Morrison cited a growing number of people in quarantine testing positive for new strains of Covid-19.
Fears that a variant of the virus from Britain, believed to be more contagious, had leaked into Brisbane from hotel quarantine triggered a snap lockdown in the city last week.
"There are many unknowns and uncertainties in relation to the new strain, and so that's why this precautionary approach, we believe, is very sensible," Morrison said.
Australia continues to deal relatively well with the virus, having recorded about 28,600 cases and 909 deaths linked to Covid-19 in a population of 25 million.