Oil Sentiment has Conflicting Signals from IEA and Saudi Aramco Stock Price

In our insight on May 14, 2020, we spoke about one of our most closely tracked news-flow sentiments on Oil News. Over the last few months as Coronavirus became a global pandemic, concerns started rising on how much crude production the global markets can absorb. As we had highlighted, the Oil Sentiment is having its ‘break out’ moment and is this change in oil news sentiment telling us that we are past the worst of Coronavirus crisis and things will get better from now on?

We looked at a few other possible signals on what may happen next in the crude oil market. But the most interesting were two data points which are giving us conflicting signals on the outlook for crude. The first is Saudi Aramco Stock price. If you recall our insight on April 21, 2020, we had made a forecast that despite the Monday, 20th April turmoil in crude oil prices, the broader outlook was not looking that bad. One of the supporting arguments for this was that the biggest and most profitable Oil Company’s stock price was largely doing fine.

How has the Saudi Aramco stock price done in last few weeks. If we see the stock price chart below, it is reflecting hardly any optimism. What could be the reasons for this? The first and most direct explanation is that the investors see that global oil demand is still a concern. The other could be that there is no pricing power with the producers and there is no consensus among major producers on their respective production quotas. So, does the Saudi Aramco stock price movement tell us that there is a possibility of pick-up in demand? No, not really!

Fig. 1: Saudi Aramco Stock Price over last one month (Source: Google)

The second data point is International Energy Agency (IEA) saying a couple of days ago that the outlook for global oil markets has improved. This should be seen as a positive though there are still concerns that while the IEA sees signs of consumption improving, demand recovery could only be gradual. But, this is a positive data point on oil demand and prices after a disastrous April. Effectively, both these data points (Saudi Aramco stock price and IEA demand commentary) are in conflict with each other and only one can then be correct indication for what will happen in this market in the coming weeks.

Nevertheless, Crude has left the “Negative Price” way behind and despite uncertainties, the prices have staged a smart recovery. But have they run ahead of fundamentals now? Only time will tell. While we don’t forecast the oil sentiment trajectory, we will keep a close watch on EMAlpha’s Oil Sentiment and keep you posted on what it indicates on global crude prices. We are entering an exciting territory for sure.

Research Team
EM Alpha LLC

For more EMAlphainsights on Emerging Markets, please visit To know how you can use EMAlpha’s unstructured data on Emerging Markets for better investment decisions, please send us an email at [email protected].

About EMAlpha:

EMAlpha, a data analytics and investment management firm focused on making Emerging Markets (EMs) accessible to global investors and unlocking EM investing using machines. EMAlpha’s focus is on Unstructured Data as the EMs are particularly susceptible to swings in news flow driven investor sentiment. We use thoroughly researched machine learning tools to track evolving sentiment specifically towards EMs and EMAlpha pays special attention to the timely measurement of news sentiment for investors as these markets can be finicky and sentiment can be capricious.Our team members have deep expertise in research and trading in multiple Emerging Markets and EMAlpha’s collaborative approach to combining machine learning tools with a fundamental approach help us understand these markets better.

This insight article is provided for informational purposes only. The information included in this article should not be used as the sole basis for making a decision as to whether or not to invest in any particular security. In making an investment decision, you must rely on your own examination of the securities and the terms of the offering. You should not construe the contents of these materials as legal, tax, investment or other advice, or a recommendation to purchase or sell any particular security. The information included in this article is based upon information reasonably available to EMAlpha as of the date noted herein. Furthermore, the information included in this site has been obtained from sources that EMAlpha believes to be reliable; however, these sources cannot be guaranteed as to their accuracy or completeness. Information contained in this insight article does not purport to be complete, nor does EMAlpha undertake any duty to update the information set forth herein. No representation, warranty or undertaking, express or implied, is given as to the accuracy or completeness of the information contained herein, by EMAlpha, its members, partners or employees, and no liability is accepted by such persons for the accuracy or completeness of any such information. This article contains certain “forward-looking statements,” which may be identified by the use of such words as “believe,” “expect,” “anticipate,” “should,” “planned,” “estimated,” “potential,” “outlook,” “forecast,” “plan” and other similar terms. Examples of forward-looking statements include, but are not limited to, estimates with respect to financial condition, results of operations, and success or lack of success of certain investment strategy. All are subject to various factors, including, but not limited to, general and local economic conditions, changing levels of competition within certain industries and markets, changes in interest rates, changes in legislation or regulation, and other economic, competitive, governmental, regulatory and technological factors affecting the operations of the companies identified herein, any or all of which could cause actual results to differ materially from projected results.