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Oil Never Lies

01 October 2020 by jbchevrel

Today the relative under performance of energy-related CDS took another leg. In US HY, MUR +24. In US IG, ETP +13 VLO +12 HAL +9 TSO +8 CNQ +7 DVN +6 etc. This is mostly as crude prices took another dive -6%, as OPEC’s production reportedly increased in September compared to August. OPEC+’s September seaborne exports jumped to 22.84 million barrels per day from 22.11 in August. For OPEC specifically, its exports rose from 17.53 million bpd in August to 18.2 million bpd in September. A Reuters survey shows that OPEC’s production for September was up 160,000 bpd from the previous month. OPEC is still in compliance. The ‘culprits’ for this production increase is mostly Iran and Libya, both of whom are exempt from the production quotas. On the demand side, bearish factors include another round of major airline layoffs affecting tens of thousands of employees, a lockdown of Madrid due to increasing coronavirus cases, disappointing vaccine news (2 separate vaccine trials have resulted in bad side effects). It is the latter that OPEC has pointed to in a meeting on Thursday as the solution to stabilizing the oil market and enable recovery.