Energy Musings contains articles and analyses dealing with important issues and developments within the energy industry, including historical perspective, with potentially significant implications for executives planning their companies’ future.
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June 2, 2023
Oil Prices Are Crashing As Headwinds Grow Stronger
Rapidan’s Robert McNally laid out the thesis for higher oil prices once we get beyond the next 3-6 months of macro-economic headwinds. Russia is feared as a quota-buster, but it will become a non-factor as global oil demand rises. The biggest threat to the oil industry is higher taxes, not climate change. READ MORE
Energy Suffers In May As Oil Prices Fall After Rally
During May, WTI oil prices fell by 11% which contributed to the Energy sector being the worst performer in the month. It is also the worst performer for the first five months of 2023. What will it take for better performance? READ MORE
Latest Developments In The U.S. Offshore Wind Market
New offshore wind farms along the New England coast are starting construction. However, political, economic, and now a proposed environmental protection area for whales could disrupt the timing of projects. We are following the multitude of developments. READ MORE
Oil Prices Are Crashing As Headwinds Grow Stronger
When the oil market opened following the Memorial Day holiday, oil prices dropped by more than 4%. From around $73 a barrel, oil prices fell to the $69 level before falling again on Wednesday. There are numerous reasons for oil price weakness including disappointing economic data from China, continued strength in the U.S. dollar’s value, concerns over the U.S. debt ceiling saga, persistent inflation, and the risk of further central bank interest rate hikes, capped off by uncertainty about the upcoming OPEC+ meeting. The prospect of an in-person gathering of OPEC+ officials has some oil watchers speculating that this meeting could lead to a further cut in production quotas or another period of market-share battles between Russia and Saudi Arabia. The banning of several media outlets from covering the gathering has further added to the mystery of what may happen this weekend in Vienna.
Given the uncertainty about these macro issues, the commodity futures market remains susceptible to increased volatile moves reflecting trader sentiment shifts. For the past several years – essentially since the start of the pandemic in 2020 – oil trading has experienced a shrinking market as traders have retreated from participation or have reduced the amount of their commitment. In fact, according to the commitment of traders’ data, the net bullish positions are the lowest they have been since 2011.