1. Newsroom
  2. Oil market review
Menu
Expertise 28.02.2019

Oil market review

Oil market review

Oil prices are up more than 23% year to date, with WTI increasing by more than USD 11 in under two months, reaching USD 56 towards the end of February.


  • The rally came as investors gauged OPEC’s effectiveness at keeping their promise to trim production by 1.2 mbd (using October’s numbers as a benchmark).
  • While the announcement was met with a lot of scepticism at the time, OPEC supply numbers according to Bloomberg showed a 1.5 mbd decrease between December and January, triggering the strong WTI rally and proving OPEC’s ability to deliver on their promises. So far, the implementation of the recent cuts is mirroring those cuts announced in November 2016 and implemented in 2017, when oil prices increased by more than 30%. It is clear that OPEC and its allies are trying to alleviate the downside pressure on crude prices by tightening supply while avoiding a market shortage. OPEC also has to manage President Donald Trump’s efforts to control prices.
  • It is important to note, however, that a portion of the production decrease by OPEC was unplanned, with an unintended 400,000 barrel decline in production on the part of Iran, Libya, Nigeria and Venezuela. Looking at Venezuela, despite its relatively low output and despite the world’s demand for heavy oil, the country is being forced to reduce production, as buyers are reluctant to take its “US-sanctioned” oil.
  • While investors have been focusing more on the possibility of supply tightening, the sensitivity of oil prices to global demand remains high and the threat of a slowdown in Chinese oil demand, coupled with the uncertainty surrounding the China–US trade war, should continue to fuel volatility on the commodity. Even though Trump recently announced substantial progress in trade talks, he might draw out any resolution of the issue, preventing a drop in price volatility.
  • Looking at oil companies, despite the fact that Q4 is historically the worst-performing quarter for the energy sector, Q4 2018 results were quite different, with most companies beating expectations on major key figures. European supermajors – our preferred subsector – showed strong cash generation and solid de-gearing of balance sheets, while maintaining strong positive momentum on dividend growth and share buybacks. Cash flow generation, CAPEX control and dividend growth should continue to be the dominant themes for European supermajors in 2019.
Investment expertise

Melki_Pierre_150x150.jpg

Pierre Melki
Equity Analyst Advisory Services

Expertise

Swiss & Global Equities

Why Swiss equities now? This market offers equity investors the stability and agility they need to navigate this volatile period. 

Read more
Expertise

European Equities

European equities offer unrivalled opportunities in terms of breadth of sector and market exposure.

Read more

Actualités les plus lues

Expertise 01.10.2020

Covid-19: Restez informés avec l'UBP

Depuis l’apparition du coronavirus, l’UBP accompagne et soutient ses clients dans le contexte inédit de cette crise sanitaire mondiale. La Banque vous informe régulièrement de l’adaptation de ses dispositifs aux règles de précaution fixées par les autorités et partage avec vous les dernières analyses de ses experts sur les conséquences de la pandémie pour l’économie mondiale et les marchés financiers.

Expertise 30.06.2020

Nouvelles perspectives d’investissement 2020 de l’UBP

L’économie globale à la croisée des chemins
Expertise 24.06.2020

Market turmoil brings new opportunities for pragmatic investors

March 2020 was difficult time for many investors, as COVID-19 spread across Europe and the US, leading to sharp sell-offs in fixed-income credit markets. While such market turbulence is not to be welcomed, its occurrence can create opportunities.


A lire également

Expertise 21.11.2020

UBP Investment Outlook 2021

Le Meilleur des Mondes

Expertise 09.11.2020

Will Chinese domestic consumers become the next global growth engine ?

China revealed the key themes of its upcoming 14th Five-Year Plan (14-FYP) and long-range objectives through the year 2035. The Fifth Plenum took place amid signs of stronger economic recovery, with better performance spilling over onto the domestic sector.
Expertise 02.11.2020

Des joyaux cachés parmi les SMID Caps suisses et européennes

Les sociétés de petite et moyenne capitalisation («SMID Caps») affichent traditionnellement des taux de croissance et des rendements supérieurs sur le long terme en comparaison des grandes capitalisations. Il est en effet plus facile de générer une croissance dynamique à partir d’une plus petite structure. Par ailleurs, les SMID Caps suisses et européennes offrent généralement aux investisseurs une exposition idéale aux grandes tendances de croissance séculaires.