Commodity Comment: Adaption

One year ago at ADIPEC the mood was incredibly fraught with oil prices collapsing in the wake of President Trump’s decision to grant eight exemptions for importers for Iranian oil as well as his implicit Twitter threats to enact the NOPEC legislation if OPEC was not suitably helpful in putting even more barrels on the market. In response, the assembled OPEC ministers were compelled to assert their independence from Washington and declare that they would quickly move to roll back the ill-fated summer supply surge. In contrast, there was no panic in the air this year and no perceived need to revive the “whatever it takes” forward guidance. There was a sense that the sovereign producers could endure, if not exactly thrive in 2020, with the macro backdrop looking a bit brighter than a few months ago and multiple forecasts for slowing shale growth. Moreover, there was a sense that they have done enough for now and that no extraordinary action was needed in the near term. In addition, the most financially sound and politically stable producers, like UAE, seem to be preparing to compete with their higher cost rivals in the coming energy transition by supercharging their trading capabilities. One of the key conference centerpieces was the twin announcements of the 2020 launch of the first Murban futures contract and the opening of the new ICE Exchange Abu Dhabi.