8,476 Active Recruiters     Over 2 Million Candidates Globally

Advanced
  1. Keep me logged in
  2. forgot password
cancel

Checkout Jobs Basket (0)

You can checkout a maximum of 150 jobs.

Signup Better for Candidates

  • Create a free virtual CV and let recruiters find you
  • Automatically have your profile matched to suitable Oil & Gas positions
  • Link to your profile using it as a free online CV
  • Store all your employment documents to your profile for easy sending
  • Always receive feedback on positions applied for

Signup Better for Recruiters

  • Suitable candidates automatically matched to your position
  • View candidate profiles for free
  • No more waiting for candidates to respond to job advertisements
  • Only ever pay when you match a candidate to a position
  • No more cold calling and sorting through out dated CVs

The 'Black Swan' Event That Could Unravel OPEC’s Efforts

Published in Oil Industry News on Friday, 14 February 2020


Graphic for News Item: The 'Black Swan' Event That Could Unravel OPEC’s Efforts

The book “The Black Swan” was written by former Wall Street trader Nassim Nicholas Taleb to describe rare, outlier events that can’t be predicted beforehand, but that have potentially huge consequences.

The phrase “black swan” has been used to describe any number of financial events, such as the 1987 stock market crash, and the 2008 financial meltdown in the housing market.

The thing to remember about black swans is that by their very nature, you never know when they are going to pop up. Although the oil markets have been hit by virus-induced demand fears in the past, such events are black swans.

Currently, the spread of coronavirus in China — the world’s largest oil consumer — is a black swan that has the oil markets reeling. Oil fundamentals looked fair a month ago, but now all bets are off. Oil prices have shed nearly 20% in four weeks, but it’s hard to say where the bottom may be with coronavirus cases still growing.

Citigroup analysts have suggested that the virus could reduce oil demand by 1 million barrels a day (BPD), but this is still clearly a developing situation.

As oil prices fell in January, OPEC was widely expected to debate additional production cuts at its March meeting. However, in the face of the most significant demand destruction the world has seen in more than a decade, the cartel tried (and failed) to get an agreement with Russia on deeper production cuts.

Jay Park, the CEO of oil company ReconAfrica, emailed me his thoughts on the ultimate impacts, which he believes are mostly already priced in:

- “We expect to see a drop in refined fuel demand markets out of China in a matter of days or weeks. A quarter of a million barrels will likely be the ultimate impact, which, all things considered, should be modest. There are five factors that affect oil pricing supply, demand, OPEC, geopolitics, and sentiment. Regarding the coronavirus, this seems to be an issue mostly related to sentiment. Demand concerns and OPEC can compound this situation, and it is something we are monitoring, but any movement right now is being driven mostly by fear. For perspective, we’re looking at past situations, like the SARS outbreak in 2003, which showed us that the impact from the outbreak was small on demand overall, but the decline in price was significant.

- We see the impact of the virus on price could be about a drop of $5-$10 a barrel in Brent and WTI. I see the coronavirus impact as already priced in, as we have seen WTI go from $63 to $53 and Brent from $68 to $59 this month. There are other bearish factors also at work, such as new production in Guyana, the perception of some weakness in demand overall in the global economy, and a seasonal reduction in demand that normally occurs this time of year. Add the coronavirus, and that becomes another issue we have to be on the lookout for. But let’s also bear in mind that similar illness-related price declines have had an impact for a limited period of 2-6 months.”

Meanwhile, one of my January predictions was that the price of West Texas Intermediate (WTI) wouldn’t close below $50/bbl this year. I felt pretty good about that prediction a month ago — before anyone had died from coronavirus — but that prediction is going to fall as fears of Chinese demand destruction grow.

That’s the other thing to remember about black swans — it’s hard to predict how big the ultimate consequence will be until the event is over. This one seems far from over.

Source: oilprice.com

Please leave comments and feedback below





Tags

OPEC Oil and Gas, OPEC, Global Oil and Gas, Saudi Oil and Gas, Iran Oil and Gas, Russian Oil and Gas, Oil Price Freeze, Oil and Gas News








Oil and Gas News Archive


Latest Oil & Gas News







Featured Companies

  • View All JobsOMPA

    Offshore Marine People & Academy (OMPA) is a global provider of personnel and training to the renewables, oil & gas, telecommunications and marine industries.

    With over 15 years' industry experience, we work with candidates to match them to the right roles and equip them with the skills and knowledge needed to succeed. Our job is to exceed your expectations.

    Visit us online: offshorempa.com

  • View All JobsChronos Oil and Gas

    Chronos Oil and Gas is one of the fastest growing and best placed recruitment agencies in the sector.

    With over 300,000 candidates on our database and an international team of specialist recruiters we work with clients to staff major projects around the world.

    Register your CV at www.chronosoilandgas.com

  • View All JobsNatural Resources

    Natural Resources is a UK based recruitment company providing personnel of all disciplines and nationalities worldwide.

    We represent clients and candidates at all levels who operate globally within oil & gas, renewables, nuclear, power, mining, marine, drilling, construction and petrochemicals. Our client base includes energy and construction.

    Visit Natural Resources at natural-resources.com