The cost to produce a barrel of oil varies throughout the world and impacts the determination of global benchmark prices. If only a portion of global supply is economic at current commodity prices, global demand will be what influences the price floor. Once inventories are drawn down, supply/demand economics will drive up the price of oil to ensure supply can meet demand. Be sure to check out the periodical below for an in depth analysis of the economic price to produce a barrel of oil around the world, and why global demand will be the driver for oil prices to set a $55-60/bbl floor for the foreseeable future.
Differential Price Recovery: How Regional Forces Are Bringing Benchmark Prices Back Towards Equilibrium
Financial markets attempted to buoy benchmark prices as oil and gas markets became volatile in Q1 2020. This created a disconnect in the price spreads between the NYMEX WTI futures benchmark and regional spot prices. The disconnect continued to grow at the beginning of the year until it reached a tipping point in April when prices plunged. Ultimately supply and demand at the regional level through purchasers like storage companies, airlines, and refineries will be what control the true value of crude prices and bring the market back into equilibrium.
Commodity Supply Balance: How Production Cuts have Caused Bullish Sentiment on Commodity Markets
The dual black swan events of the COVID-19 pandemic and oil price war have created a unique analytical opportunity within petroleum products. As oil prices crashed, natural gas prices have largely remained unchanged due to the markets in which the commodities are used. Transportation which is the main use of oil has almost entirely stopped, whereas electricity generation and heating, the destination for most natural gases has remained similar to pre-2020 levels. Such modifications to consumption caused markets to go haywire and commodity prices to crash. With crude production cuts now occurring at a faster pace than anticipated and states lifting restrictions, supply and demand dynamics for liquids compared to natural gas has changed since April. As the United States begins returning to normal, an update to these commodity market assumptions is in order.
The Incoming Glut: Excessive Levels of Heavy Crude Supply in a Saturated Market
The worst of the coronavirus induced oil crash seems to have bottomed out as storage inventories saw fairly dramatic drawdowns in the final weeks of May, a reversal of events from the past several months. Such relief may be all but eliminated in the ensuing week as an influx of nearly fifty million barrels of foreign crude oil is about to reach the U.S. Gulf and West coasts. The volume of incoming crude may offset most of the production cuts generated by domestic operators and extend low oil prices until the inventories can be worked back down.
Post-Crisis Recovery: Oil Supply and Demand is Moving Back Towards Equilibrium with China Leading the Way
The dual black swan events of 2020 have thrown supply and demand far out of equilibrium but with China purchasing crude again and various parts of the United States starting to open back up, global oil demand is beginning to return. As the world begins to recover to pre-pandemic levels, market forces will support the shift back towards equilibrium just like the shift we are currently seeing in China.
Crude Benchmarks and Price Spreads: How Market Intervention Creates Disconnect Between Regional and International Crude Prices
Speculator sentiment towards future pricing of commodities can create a wedge between regional and benchmark prices even though they are based on the same supply-demand principles. As long as financial markets continue to buoy WTI futures, these price spreads will continue to widen.
Natural Gas Rebound Poised for Recovery Before Crude Oil: Why the Market has Priced Electricity and Liquid Fuel Demand into Commodity Prices
The dual black swan events of the COVID-19 pandemic and oil price war have created a unique analytical opportunity within petroleum products as the strip price for natural gas is showing larger percentage increases than crude or NGLs because the market is pricing in the assumption that continued electricity demand will not fall as quickly as the oversupply of natural gas.
Monday Madness: March 23
In this episode your host Tavis talks about, you guessed it, the virus. Huge drops in energy demand, no more nail salons for Nana, and the government asking a celebrity