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Why Fundamentals In Oil Markets Haven’t Changed

Pipeline

Last week we wrote about Oil’s Big Week highlighting the importance of the OPEC+ and Trump/Xi G20 meetings which transpired in the last few days. Unfortunately the week’s events seem to have provided a short-term sugar high for markets but neither generated a fundamentally strong outcome for the oil.

On the OPEC+ side, we noted that traders seemed to be pricing in an expected production cut of about 1m bpd and that anything below 500k bpd or above 1.5m bpd would generate a bearish or bullish reaction. The surprise came in the bearish form as the Saudi’s have failed to get Russia on board with group production cuts on Thursday, but managed to secure a deal on Friday morning. The market sorely needs conviction from its primary exporters to reduce supplies and so far there’s a serious lack of cooperation on this front.

As disappointing as the OPEC+ meeting was on Thursday, the cartel managed to get its members and partners on board and agreed on a 1.2 million bpd cut. Despite the fresh deal, remain concerned about the health of the oil market- and the global economy- following the soft truce reached by Trump and Xi at their G20 meeting in Argentina. President Trump took to Twitter following the meeting and expressed a variety of contradictory signals but stock, bond and commodity markets seemed sick of the mixed messages.

In the U.S., the S&P jumped from 2,650 up to 2,800 after Trump announced that significant progress had been made…

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