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Oil Markets Jittery

Published 04/01/2021, 03:19 AM
Updated 07/09/2023, 06:31 AM
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Oil markets are a lot more jittery than one would have expected, with virtually everyone supposedly reading the same side of the can that say's  "OPEC+, having maintained production cuts at higher prices last month, seems less likely to open the taps at current levels?" 

Micheal Hsueh over at Deutsche Bank sums that view up nicely, suggesting " Father OPEC knows best" while suggesting a rollover of existing cuts are in the bag and even arguing that Saudi could win the day pushing for a deeper cut, fingers crossed. 

On the other hand, Helima Croft at RBC is leaning the other way, suggesting that Saudi Arabia could succumb to pressure from Russia. 

This perfectly illustrates the jittery market backdrop and supports my view that traders need to position for OPEC+ "what-ifs: who in the past have been overly charitable at the cost of missing the opportunity to reintroduce some latent supply at much higher prices. 

But to my oil traders, I'm gonna harp on this until the cows come home.

But at the heart of it all, the rally was mainly on the back of OPEC+ production cuts—or rather, the fact that they agreed to hold production steady in April instead of ramping up production as the market had anticipated. So I suspect the oil market is experiencing a bit of reality check these days as the supercycle bulls might be giving way to the power of spare capacity as the thought of more barrels coming back continues to provide the medium-term supply headwind.

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