RE:RE:RE:I would WaitI don't expect a major decline in oil prices but I also don't expect a major increase either. I suspect WTI will be range bound between $25-35 for some time.
It's interesting to see that the differential between Brent and WTI has narrowed to just less than $3 recently. Any thoughts on that?
The recent increase in price is largely due to optimism related to economies opening back up and production slowing down. However, beyond the headlines the particulars are far more opaque with significant unanswered questions.
1. Where is demand relative to Pre-Covid levels?
2. How much are producers complying with supply cuts relative to what they say?
3. How quickly can the storage glut be worked through and what effect is this having on real pricing?
I think there will be a cieling put on pricing of around $35 at least until the glut dissipates as many producers will find better economics in keeping pumping at those rates rather than shutting in production. This is already being documented.
MEG, which hedges in place, flexibility in production levels, low decline rates, plenty of available liquidity, debt not due for four years, strong egress options and relatively low costs is in a good position to ride out the storm.
I wouldn't expect widespread shutdowns in the US to take place during the summer as the virus doesn't spread quite as easiliy in warm environments and the Yankees are chomping at the bit to be let loose and will not be confined as easily during a second wave.