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Monday, May 20, 2024

Range-bound crude prices & European majors' antics

After a fairly volatile April, a sense of relative calm has returned to the global oil markets in May. Since the start of the month, Brent futures have fluctuated between $82-84 per barrel with the global proxy benchmark's $85 support having been firmly breached last month. 

What was April's technical support level is proving to be this month's resistance level with oil struggling to cap $85 in a market still searching for a firm direction of travel.

It's doubtful if OPEC+ would be the one to provide direction. The Oilholic's reading of market sentiment is that a rollover of production cuts by the producers' group has been largely priced in by the market. 

If China's data remains positive overall, and the second reading of the US Q1 GDP is similarly so, perhaps an uptick in prices may be expected in the second half of the year. However, for now Brent remains in technical backwardation, i.e. the current contract is trading higher compared to one six months or more out. For example, Jan 2025 Brent is just north of $81 at the time of writing this blog. 

The oil price isn't too high and it isn't too low at the moment. So if you were OPEC+ why would you make any headline moves on production quotas? Much rather focus on soothing internal tensions for the common cause. Well their common cause, obviously not the consumers'! 

Away from crude prices, the European oil and gas majors sang from the same hymn sheet in recent weeks at the release of their quarterly results - offer shareholders higher dividends and announce multi-billion share buybacks. BP, Shell and TotalEnergies were all at it, but the latter two went one step further by professing their love for a primary US-listing in search of a higher valuation. 

Here are this blogger's musings on their antics and reasons via Forbes, and Chevron calling time on 55 years of oil and gas exploration in the North Sea. That's a wrap. More musings to follow soon. Keep reading, keep it here, keep it 'crude'! 

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© Gaurav Sharma 2024. Photo: Oil pump jack model at the AVEVA World 2023 Conference, Moscone Center, San Francisco, US© Gaurav Sharma October 2023. 

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