WTI finished Friday at $61.42, down nearly $4.00/Bbl week-over-week after Thursday's 8% price route. Rumblings of weak physical crude demand in Asia, along with other factors, contributed to a drop in prices across the entire forward curve. Since last Friday's close, Bal 2021 fell $3.55/Bbl, while Cal 2022 fell $2.06/Bbl. Thursday's price wash-out likely had more to do with trader behavior and speculator exits rather than longer-term fundamentals.
According to Bloomberg, there have been reports of China buying sanctioned Iranian crude oil, pushing out other would-be sellers in the market. Oil from Iran is heavily discounted due to American sanctions. In China, it usually trades at a $3.00/Bbl to $5.00/Bbl discount to the Brent crude benchmark, according to traders cited by Bloomberg.
The recent price decline, if it holds, may push Saudi Arabia and OPEC+ to continue its cautious supply approach as the pace of demand recovery remains unclear. OPEC+ will meet early next month to discuss its policy.
We have been consistent in recommending hedges as the market has continued to rally. Producers who hedge accretively & proactively tend to do the best. AEGIS structure recommendations still favor the swap when looking to add hedge volumes through Cal 2022.