(+) Quick market round-up

(Denne rapporten ble først publisert 26. juni).

Round-up

As we move into the second half of 2023, it is important for us to glance back in order to better
understand what will happen in the future. Hindsight is 20-20. The price of Brent crude has failed to
stabilize at a level that reflects the reported tight fundamental outlook. OPEC+, led by Saudi Arabia, has
aggressively cut production under the guise of market stabilization. The world’s largest oil exporter has
shown willingness to make further cuts to maintain price stability. We still believe that the tight
fundamental outlook will reflect in the oil price in the second half of 2023, but we are closely monitoring
key indicators. The entire market is on a knife’s edge, not just the oil market, but the other markets as

• Tighter monetary policy in OECD countries and governments working to combat inflation are spreading uncertainty in the oil market. Future demand depends on the macroeconomic landscape and China’s recovery after the pandemic. Although uncertainties loom over the market, we are not yet downgrading the estimates for 2023. Instead, we are closely monitoring the market to make new assessments when appropriate
• The key factors weighing against a higher oil price are a severe recession, lack of cuts from OPEC+, and Russia continuing to flood the market with oil and petroleum products. In such a scenario, the oil price would hit and surpass the bear estimates presented in the June report.
• China’s economy relies heavily on government intervention, and Beijing delivered with a stimulus package to sustain GDP growth. As the world’s second-largest economy, China plays a vital role in oil demand. In previous years, China’s oil demand has been closely linked to GDP growth. Higher GDP growth translates into higher demand, and China’s growth is estimated to be slightly above 5%.
• The onshore rig market in the United States is still experiencing a downward trend, and price-sensitive projects, especially from smaller players, are being put on hold more quickly than in the offshore market. The Baker Hughes rig count on June 16th showed a total weekly decrease of 8 rigs and a year-over-year decrease of 53 rigs.
• In the future market the relatively small difference of approximately $2.50 between the price of oil for the near-term delivery compared to four months ahead not only indicates a risk-off sentiment towards oil and commodities but also reflects uncertainty regarding future demand. This significant flatness in the price curve suggests underlying concerns and ambiguity surrounding projected oil demand growth throughout 2023. It raises the question of whether the production cuts were indeed an effort to align with declining demand projections.