But first, let's sum up April's 'crude' carnage. The Brent front-month contract has broken its $85 per barrel support level. This wasn't looking likely at the start of the month when prices were lurking well above the level and even overshot to $92 in the wake of the Iran-Israel skirmish. Yet, as the second month of the second quarter of the oil trading year nears its conclusion, the price is barely holding above $83. Why? Well in this blogger's humble opinion that's certainly not because the risk has gone away. The residual risk still persists.
However, with the Iran-Israel tensions having eased and oil sliding from $90+ highs, as trading stumbles into May with (thankfully) no regional damage to energy infrastructure - concerns over demand have resurfaced in a market struggling for direction. On one hand there are still lingering doubts about the performance of China's economy (yes there are) and the general direction of travel for the global economy, while on the other is an overriding sentiment that OPEC will hold firm on its price supportive actions. It what's your truly told Reuters the other day.
Yes, Beijing is indeed importing record amounts of crude oil. But its importation uptick is nothing like it was pre-Covid. And quite a few of the barrels it is importing are being used to boost its strategic reserves. Furthermore, you can count an economy to have motored on in any given fiscal year if its data was consistently pointing to an upswing in economic sentiment, which it clearly isn't in China's case. Hence the doubts.
It appears to be actively positioning for a Brent price that is at least 15-20% higher than pre-Covid levels of around $75, seen at the start of January 2020. That'd be around a $80-$90 - a level that's not too high for buyers, not too low for it and well short of three-figures. It's why a market seeking direction is witnessing the current oscillation, while OPEC is left with plenty of spare capacity.
Away from crude chatter, and on to the happy matter of OPTIMIZE24, an event where the great and the good of the technical and engineering side of energy, industrial, chemical and manufacturing worlds are gathering this week at the behest of AspenTech. This blogger looks forward examining, discussing and learning about the challenges and solutions for the approaching low carbon horizon, and of course joining the dots between improved throughput and meeting emissions targets.
The event's slogan "Partnering for the future" has a nice ring to it. Let's see how it sings over the next couple of days. More from H-Town soon. Keep reading, keep it here, keep it 'crude'!
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