November 2018


         A month ago, CyclOpe expressed regret for its oil forecasts at the beginning of the year. The market was then at over $85 for a barrel of Brent and bets were open on when the $100 mark would be exceeded. Now we are at $70 and the CyclOpe forecast ($60) is back, at least for the beginning of 2019.


         How to explain such a reversal? There was the Kashoggi affair that put pressure on Saudi Arabia vis-à-vis the United States and encouraged it to comply with Trump’s tweets by flaming the fires of its production and exports. There were also US production numbers that exceeded expectations. In early autumn, Saudi Arabia, Russia and the United States broke production records and more than made up for the million barrels lost in Iranian exports. And then, what about Washington’s decision to grant eight countries waivers for their imports of Iranian oil? For at least six months, Iran is slated to sell about 2 mbd and that’s what the market has chosen. Funds changed position and ‘bulls’ became ‘bears’. We are now talking about a surplus market and OPEC+ is starting to crack. The follow-up will be in Vienna on December 5th. But Saudi Arabia has already announced that it will reduce its exports by 500,000 bpd in December.


          With the American elections over, we will have to resume the line of an American diplomacy that is more confused than ever and in particular, deal with the Chinese file, which has hardly budged since the last sanctions. An editorial in the Financial Times compared the US-China struggle to the long war in Greece that saw Sparta and Athens oppose one another, and in fact neither emerged victorious. But it is uncertain whether either Donald Trump or Xi Jinping have read Thucydides…


          Finally, let us note that in this autumn of 2018, a certain wind of pessimism–which in our opinion is pretty much founded–is blowing over the world: overheating and reversal in the United States (and recession in 2020), slowdown in China, crisis in Europe, doubts among the emerging nations… 2019 could just as easily be the peak of the cycle as its reversal. To be continued…


Philippe Chalmin

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