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“Oil markets are in a state of shock this morning as the fallout from last Friday’s OPEC+ meeting took a turn for the worst this weekend,” noted Rabobank commodities strategist Ryan Fitzmaurice.

Key quotes

“The Saudis announced extreme measures on Sunday in response to Russia’s unwillingness to participate in deeper supply cuts by drastically slashing “Official Selling Prices” (OSPs) to Asian refiners for April, thereby kicking off a three-way market share war between the US, Russia, and Saudi Arabia. For clarity, the Saudis and other Middle East producers choose to sell their barrels on a formula basis and as a discount or premium to global benchmarks rather than in the spot market.”

“Looking forward we see notable headwinds for oil prices in the current environment as oil supplies are expected to meaningfully increase in the near-term, large speculators are likely to remain net “sellers”, and the forward curve moves deeper and deeper into “contango” as a result.”

“It is worth noting, however, that large speculators had largely “capitulated” on “long” positions prior to this week’s historic price decline which should result in less selling pressure on the margin than if speculators were a big “long” preceding the decline. It would also not surprise us to see an emergency OPEC+ meeting called if prices remain at these levels for a sustained period of time.”