In the weeks since our last edition of What’s Affecting Oil Prices, Brent rose $3.17/bbl last week to average $66.84/bbl while WTI rose $2.93/bbl to average $56.81/bbl.
After a strong week, prices today have fallen sharply, despite recent announcements on the U.S.-China trade deal. Prices could have trouble finding direction this week, but are unlikely to continue falling sharply. Brent will likely average $65/bbl this week.
Late Sunday President Trump and Xinhua (China’s state-run news agency) announced “significant progress” on the trade negotiations. President Trump has announced that the March 1 tariff increase will be delayed so that negotiations can progress. We eventually expect to see a formal agreement between the two sides but are not confident that actual change will occur. China has a record of agreeing to business terms and then slow-playing their implementation.
RELATED: Trump Calls On OPEC To 'Relax,' Says Oil Prices Are Too High
While the economic news is supportive for future demand expectations, prices still fell on February 25. President Trump took to Twitter to call on OPEC not to raise prices and Brent fell nearly 3%. Prices should recover though as OPEC is unlikely to heed Trump’s suggestion. However, there have been increasing cracks appearing in the OPEC deal. Multiple countries have expressed frustration with the agreement and the fact that it offers an advantage to producers not involved with the deal (aka the U.S.). This raises the possibility that the deal is not extended at OPEC’s next meeting in April. If the deal were to dissolve, prices would fall on expectations of increased global supply.
Two geopolitical items to watch this week: Vice President Mike Pence is scheduled to meet with Venezuela’s interim-President Juan Guaidó where he could ask for the U.S. and other countries to physically intervene and help remove Maduro. Additionally, Nigeria held its delayed presidential election over the weekend but official results have not been announced. While violence was relatively low during elections, a disputed election could lead to more widespread upset.
Geopolitical: Positive
Dollar: Negative
Trader Sentiment: Positive
Supply: Negative
Demand: Neutral
Refining Margins: Neutral
How We Did
Recommended Reading
As Permian Targets Grow Scarce, 3Q M&A Drops to $12B—Enverus
2024-10-16 - Upstream M&A activity fell sharply in the third quarter as public consolidation slowed and Permian Basin targets dwindled, according to Enverus Intelligence Research.
Report: ConocoPhillips Shopping Delaware Basin Assets for $1B Sale
2024-10-30 - ConocoPhillips has laid out a $2 billion divestiture campaign to reduce debt from a blockbuster acquisition of Marathon Oil.
Diamondback’s Viper Buys $1.1B in Permian Mineral, Royalty Interests
2024-09-11 - Diamondback subsidiary Viper Energy is spending $1.1 billion on a series of Permian Basin mineral and royalty acquisitions from Tumbleweed Royalty, which was formed by the executives behind Double Eagle Energy.
Oxy CEO Sheds Light on Powder River Basin Sale to Anschutz
2024-11-14 - Occidental is selling non-core assets in the Lower 48 as it works to reduce debt from a $12 billion Permian Basin acquisition.
Great Expectations Continue to Round Out a Big Year in A&D
2024-10-17 - At least $1.8 billion in A&D transactions have taken place already in 2024.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.