Crude Corona Cocktail
“Markets are constantly in a state of uncertainty and flux, and money is made by discounting the obvious and betting on the unexpected” - George Soros
Over the weekend, Commodity Markets reacted sharply to Coronavius news.
OPEC+ is holding a meeting today, re/ the virus
Unipec (China) halts West African crude purchases
Citi does not see a full Oil Market recovery until Q4.
On the Gas front, the LNG market may to be facing pressure soon -
CNOOC, PetroChina & Sinopec are all considering a declaration of Force Majeure:
Total, in particular, could facing a sharp hit - among the IOCs, they’re the 2nd largest in LNG.
In the trading world, Gunvor is largest independent player.
As we move out of winter, the LNG developments may prove to be the most chaotic -
Something strange is happening in Belarus -
We don’t know what exactly…
…but we do know that it began in ‘96:
That year, Belarus + Russia signed an agreement, creating a Union State
Boris Yeltsin was president of Russia
Yeltsin was a weak leader…
Alexander Lukashenko was (and still is) Belarus’s de-facto dictator.
He saw an opportunity:
If the Union was to be fully consummated, there’d be an election
Lukashenko reasoned that he would beat Yeltsin
In the end, Putin came to power - put Russia back together - and the Union was never completed.
Today, Belarus & that Union State deal are back in the headlines.
Putin needs a way to get around term limits…
And leadership of a completed Union is one option.
So now, the tables have turned - Lukashenko is the vulnerable one.
Russia has cut Oil & Gas supplies, pushing the envelope...
Lucky for Lukashenko - the US sees these developments as an opportunity:
For the 1st time in >10yrs, the US is going to appoint an ambassador to Belarus
The US Secretary of State has also offered to supply Oil & Gas
Where this goes - we don’t know.
There’ll be 1x winner max - likely none.
Chaos would be a complete Union, *with an election*.
In a free election (albeit doubtful) - Lukashenko just might give Putin a run for his money -
On Sunday night (Monday in Asia), the Markets Vomited:
Chinese equities had their worst day in 5yrs
Brent crude traded down to $55/bbl
We updated our initial model - added in data + a few other features.
A couple notes:
Quality of data is still a concern
There are rumors of testing kit shortages
The date that a vaccine gets to market will be the most important, going forward.
Keep an eye out for that -
Trent Jacobs wrote a piece on Tight-Oil Well Terminal Decline Rates
A classic student / teacher exchange, at Oxford:
“I am not able to arrange any divestment [Oil & Gas Equities] at short notice. But I can arrange for the gas central heating in college to be switched off with immediate effect”
We like this guy, and we’ll leave it at that -
That’s it for today - we’ll be back Friday -