Having fallen to recent historic lows, Brent has had some respite the last couple of days, having bounced 20% since its lows on Friday (at time of writing). China’s announcement that it will be boosting its Strategic Petroleum Reserves supported crude, as did an announcement from the man himself, Trump, who claims the Saudi-Russian oil dispute can be resolved. Trump reportedly said: “They’re negotiating, they’re talking, and I think they’ll come up with something,” adding, “I do believe there’s a way that that can be solved or pretty well solved.”
Following the statement that “We don’t want to lose our great oil companies,” Trump is set to meet the independent and major US oil execs on Friday to try to support the country’s fraught industry. The US is also reportedly ramping up its government reserves, and could hoover up as much as 77 million barrels across the global crude market. However, with Saudi pumping at full speed and global demand remaining subdued there are concerns that global reserves could be maxed out within this month. This may in turn force Saudi Arabia to slow production; Russia is reportedly not increasing its output as it's not profitable to do so currently. Floating storage is also showing signs of increased capacity with just over 55 VLCCs (very large crude carriers) remaining to deliver (2 million barrels each) through April; Saudi is responsible for most of the VLCC bookings, which has seen freight costs increase.
Some economies such as Oman’s have really suffered as oil has plummeted due to its very high breakeven point. The nation’s rating was therefore cut by one notch by all the major rating agencies last month to Ba2/BB-/BB (Moody’s/S&P/Fitch). We do not hold any Oman (or any sub-investment grade bonds), having sold out of our positions in the middle of 2019. However, the wealthy oil nations that we do hold including Abu Dhabi, Qatar and Russia have been affirmed as investment grade Aa2, Aa3 and Baa2/BBB-, respectively.