Oil: Prices show extreme weakness – Standard Chartered

Analysts at Standard Chartered points out that oil prices have continued to show extreme weakness as front-month Brent traded below USD 50 per barrel (bbl) on 4 May, for the first time since 30 November 2016, the day of the last OPEC meeting.

Key Quotes

“Brent fell as low as USD 46.64 per barrel on 5 May, before recovering to settle at USD 49.10/bbl. The weakness has extended along the curve; indeed, on 4 May every Brent contract out to May 2019 settled below USD 50/bbl. The latest price weakness has also flattened the Brent curve, with all points more than two years out on the curve showing y/y declines.”

“OPEC meets in Vienna on 25 May, the day after the next meeting of the Joint OPECNon-OPEC Ministerial Monitoring Committee (JMMC). The latest JMMC report put the conformity level for output cuts among the signatories to the agreement at 98%, and we would not expect any significant deviation from that to be announced at the 24 May meeting. Up to now, the main issue of discussion has been whether the agreement would be rolled over until the end of 2017, and we think that a six-month extension is already largely discounted in current prices. However, both Khalid al Falih, Saudi Arabia’s Minister of Energy, Industry and Natural Resources, and Alexander Novak, Russia’s Energy Minister, have recently signalled support for an extension into 2018, should market circumstances so determine.”