Oil is set for the biggest weekly gain since October on sustained geopolitical tensions, lower US crude stockpiles, and prospects for additional government stimulus in key crude importer China. Bloomberg’s Stephen Stapczynski reports.
For the latest on oil prices click here: https://www.bloomberg.com/news/articles/2024-01-26/latest-oil-market-news-and-analysis-for-january-26
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TOM: STEPHEN, A BIG WEEK FOR OIL. PRICES HAVE BEEN GRINDING HIGHER. UNPACK THIS AND WHETHER OR NOT YOU THICK IT BE SUSTAINED. STEPHEN: WE ARE SEEING THE IMPACT OF THE RED SEA ON THAT RISK FUNNELING THROUGH TO OIL PRICES. SINCE THE TENSION BEGAN A FEW MONTHS AGO AND IT BEGAN ON THE
SOUTHERN PART OF THE RED SEA, THERE WAS AN AND IN NORMA’S IMPACT ON OIL PRICES. BUT NOW THAT MORE AND MORE COMPANIES AND OIL TRADERS AND SUPPLIERS ARE AVOIDING THE RED SEA, WHICH IS KEY PASSAGE FOR THE — FOR THE SUEZ CANAL FOR ASIA. IT IS CAUSING DISRUPTIONS. THERE IS THIS DISPLACEMENT OF
SUPPLIES. OF THE SAME TIME PAYING FOR RATES, THE COST. RENTING A SHIP IS ALSO GOING UP. SUMMERED SINCE 2020, SINCE THERE WAS A BIG GLAD OF OIL IN THE MARKETS THAT PEOPLE WERE USING TINKERS TO STORE THE FUEL AND THERE WASN’T ENOUGH. WE ARE GETTING TO A SITUATION
WHERE OIL TANKERS ARE GETTING TIRED AND PUSHING THINGS EITHER. U.S. OIL STOCKPILES ARE FALLING MORE THAN THE MARKET WAS EXPECTING. THAT SHOWING THAT MAYBE THERE WAS A BRIGHTER DEMAND PICTURE IN THE UNITED STATES. AND YOU HAVE CHINESE STIMULUS, THE GOVERNMENT IS DOING WHAT
THEY CAN TO PICK THINGS UP. CREATING MORE OF A BULLISH SCENARIO FOR OIL OVER THE LAST FEW DAYS. ANNA: INTERESTING SAUDI ARAMCO POINTED ON COLLEAGUES. THEY ARE CONTINUING TO SEND ITS TANKER LOADS OF CRUDE AND FUELS THROUGH THE SOUTHERN RED SIX. YOU MENTION THE OTHER FACTORS
SUPPORTING OIL PRICES. HOW DO INVENTORIES PLAY IN? THE CHINA STIMULUS SEEMS QUIET OFFER WHAT’S HAPPENING. >> THE INVENTORY STORY IN THE U.S. SHOWS, MAYBE TAKE A STEP BACK. ONE OF THE BIG AIR SCENARIOS FOR OIL THIS YEAR’S NON-OPEC-PLUS SUPPLY. THAT IS U.S. PROTECTION FROM SHALE. THERE IS THIS EXPECTATION IN
THE MARKET THAT THE U.S. IS GOING TO BE FLOODING EVERYONE WOULD SHARE OIL, BOTH DOMESTICALLY AND OVERSEAS, INVENTORIES AND THE U.S. DROPPED MORE THAN EXPECTED. THAT IS A DEMAND STORY. THE U.S. IS USING MORE. THAT’S A STORY OF SUPPLY. MAYBE SUPPLY ISN’T AS RESILIENT
AS THE MARKET IS EXPECTED. MAYBE THERE ARE SOME CRACKS THERE BECAUSE WHEN YOU DO GET TO A LOWER PRICE POINT, SOME DRILLERS DECIDE NOT TO PRODUCE AS MUCH AS THEY WOULD IF OIL WERE AT $80 WTI OR $90. SO THOSE THINGS TOGETHER KIND OF PAINT THE PICTURE OF, HOW
RESILIENT IS THIS U.S. SHALE OUTPUT. IT IS SOMETHING THAT IS CLEARLY IN THE TOP OF THE MARKET BECAUSE, WHEN YOU LOOK AT WHERE SUPPLIES COMING OUT, OPEC-PLUS HAS BEEN REDUCING THEIR OUTPUT TO HELP BALANCE THE MARKET. BUT SHELL CANNOT DO THAT BECAUSE IT IS A BUNCH OF
INDEPENDENT PRODUCERS. THAT IS MORE OF A BEARISH ELEMENT THAT HAS REALLY CAUGHT HOLD OF THE MARKET OVER THE LAST FEW MONTHS.