180 - Is the oil market tight? Rory Johnston with Commodity Context explains

Oil Price Slumps on Fears of New Covid-19 Restrictionshttps://www.wsj.com/articles/oil-price-slumps-on-fears-of-new-covid-19-restrictions-11637953717Interesting Black Friday for markets - oil plummeting, stock markets plummetingStocks, oil regain some composure after Omicron batteringhttps://www.reuters.com/markets/europe/global-markets-wrapup-1-pix-2021-11-28/Germany says working with U.S. on Nord Stream 2 dealhttps://www.reuters.com/markets/commodities/germany-says-working-with-us-nord-stream-2-deal-2021-11-28/- Germany claims it will make "strong public messages" against Russia if it tries to invade Ukraine- Can Nordstream 2 get online in time to help with European energy crisis or is it mired in bureaucratic messSaudi oil minister not worried about new Covid varianthttps://www.argusmedia.com/en/news/2278117-saudi-oil-minister-not-worried-about-new-covid-variant- If not worried about Omicron what are they worried about? stockbuilds and SPR releases- If OPEC pauses its increases, will that be seen as a win for Biden?Europe’s Energy Crisis Is About To Get Worse As Winter Arriveshttps://gcaptain.com/europes-energy-crisis-is-about-to-get-worse-as-winter-arrives/Special Guest Rory Johnston- Toronto-based commodities analysts, formerly for Scotia Bank- Currently at Price Street and Commodity Context - - Sign up for his substack at: https://commoditycontext.substack.com- Data driven, chart-driven to discuss what analysts look at for the common-man- Where is the oil market right now? oversupplied? under-supplied? - slightly under supplied in a longer-term basis. tremendous amount of inventory flowing out of commercial storage around the world. Competing with new production. The financial is dragging the physical along.- The financial markets are leading the physical markets which can cause big swings- We are already in a speculative-liquidation cycle- Cyclical peak hit back in October- Financial markets think we are tight, for whatever reason, manifesting with tight markets. But we also have slow clearance on physical. Physical signals have been flashing weak from $40 up to $85.- Saudi Arabia's primary concern is long-term demand, long-term prices, price dove within OPEC. Oversupplied markets in 2022 is counting on at least 1 million bpd more coming from US shale patch.- In the past, when prices hit $80, we got over 2 million bpd of production growth. Now we aren't. Not happening yet.- OPEC thinks we need higher prices to test sensitivity of shale. If we don't get 1 million bpd + of production from shale, then it's a deeply undersupplied market.- OPEC+ is like trying to turn an aircraft carrier as opposed to a speed boat- Thinks OPEC will likely stick with the plan, although Black Friday changed the calculus- JP Morgan doesn't think OPEC+ has capacity to increase production by 400,000 bpd more. Can probably increase for another couple of months but some producers will not be able to reach their baselines. Some will. West African producers may have difficulty.- Divergence with natural gas prices in US and Europe.- US natural gas prices went up because big change in US LNG exports - they have grown a lot. Initially LNG exports were a mildly flexible source of demand. good for North American energy security on a long-term basis. But if there was an exceptionally cold winter they could be redirected to domestic use. BUT that won't happen now because LNG export prices are 6 times Henry Hub prices! - LNG market is still pricey, but North American demand looks a little weaker now based on temperature forecasts.- European natural gas inventories are already at a low point and the start of cold weather is hitting them. It would take a lot to see that in North America. This is a public episode. If you would like to discuss this with other subscribers or get access to bonus episodes, visit energyweek.substack.com