Several arguments in favor of medium-term oil sales

15 ביוני 2018

Given the nature of the news that has recently come out on the oil market, we believe that it's time to seriously talk about mid-term oil sales. This is a reduction to $ 40 per barrel and lower.

What can be the basis for such a movement? Here are a few key arguments:

1. Saudi Arabia and Russia are increasing their oil production (the Saudis have increased their production to the highest level since October 2017 - 10.03 million barrels per day, while Russia has already reached its maximum in the past 14 months). What de facto means a rejection of OPEC +. Recall, it was OPEC + ensured the growth of oil from $ 30 to $ 70. More clarity will appear on the results of the OPEC meeting, which will be held on June 22-23. In the meantime, there are rumors that Russia plans to offer OPEC and its allies to return to production levels in October 2016 and to restore production within three months

2. Oil production in the US came close to the level of 11 million barrels a day. The US is actively increasing exports to Asian countries China, taking there the market share from Russia and Saudi Arabia. The volume of US oil sold abroad reached a record 2.57 million barrels per day in May.

3. Trump urged oil producers to increase production to avoid excessive price pressure on the US economy and the world as a whole.

4. More than half of the new electricity in the US, in 2018 was provided by solar energy. That is, alternative sources have already come to replace the energy of hydrocarbons. And this is a very serious factor in favor of the fact that the current models predicting the demand for oil are based on incorrect assumptions. By the way about forecasts of demand for oil. It's no secret that the demand for oil directly depends on the pace of development of the world economy. So, in the last interview, IMF Managing Director Christine Lagarde noted that the risks of the global economy are increasing and in general the clouds are gathering over it. So, the clouds are gathering and over the demand for oil.

This, of course, is not a complete list of arguments. But this is something that can act as the basis for the formation of a downtrend. Thus, our position is medium-term sales of oil from current ones with targets in the region of $ 40 per barrel. Obviously, it will take more than a month to reach these marks, so we recommend that you have enough patience.