FILE – In this file photo, the sun is setting behind a sleek pump jacket near Karnes City, Texas. (AP … [+]
PRESS ASSOCIATED
As long as crude prices go up, the oil market has recovered from the pandemic. Brent traded above $ 67 per barrel last week, about $ 10 higher than it was a year ago when pandemic jitters began to hit oil prices and the relative co. equal to the price at the beginning of 2020.
Some traders fear that the market is running ahead of itself as financial players have been heavily influenced by the rally by buying oil futures contracts. But corporate prices and the spread time on the exchanges support the strength of this market.
The loops for Brent and the U.S. West Texas Intermediate (WTI) benchmark are firmly in the back of a leg for the future. This means that prices for fast oil delivery trade at a prime price to oil for later delivery and reflect a tight crude market. The oil market is made up of a rebalancing of supply and demand from the pandemic.
Supply cuts from the OPEC-plus alliance rely on market equilibrium. Capital investment cuts by U.S. producers have also helped. During recent fourth-quarter earnings calls, Coalstone producers said almost no growth this year despite a recent spike in WTI to more than $ 60 a barrel – the first time they have has broken that level since early 2020. The sector’s commitment is a coalstone for capital control and the delivery of financial results poses significant pressure behind OPEC. Limestone is not a short-term threat, and OPEC cartel members know it.
Boosting the market too is the expectation that 200,000 barrels per day or more of frozen U.S. production will not return with Winter Storm Uri in February, regardless of prices. Operators are not considering investing in refurbishing this high-cost product a good bet.
What to expect from U.S. production this year? It is likely to rise from around 11 million barrels per day at the beginning of 2021 to leave at 11.6 million barrels per day at best, and an average of 11.3 million barrels per day for the full year. OPEC can address that, especially considering that U.S. production was running at a peak of 13 million barrels per day before the outbreak and recorded annual growth rates of 1 million barrels per day. Stone is now under control.
The elephant is still in the room as the OPEC-plus alliance handles the 9 million barrels per day – including Iran – of extra capacity it has lost. These cuts and the hope that Covid vaccines will significantly increase oil demand in the second half of 2021 are the main reasons for the recent rally in oil prices.
Saudi Arabia has led the way, including importing an additional 1 million barrels per day in February and March to account for lost demand from its bankruptcy. Covid’s new locks and locks, especially in Europe.
Riyadh does not plan to extend this bonus cut beyond the end of March. Saudi is keen to recover market share from these cuts, particularly in Asia, where China has brought its crude demand back to pre-pandemic levels.
Price increases are the perfect introduction for OPEC-plus to decide at their meeting this week to bring more than 2 million barrels per day back to market. They need the income – and prices are too high to pass up. Saudi Arabia accounts for most of the extra barrels that reach the market since it made the biggest cuts.
Managing the increase in supply to meet growing demand is the particular challenge facing the OPEC-plus alliance. The good news is that many experts expect demand to return near pre-pandemic levels by the end of this year.
With many meters now marking a less relevant oil market, OPEC + is finding itself in a very envious position. In addition to the rosier demand forecasts, Libya’s export recovery appears to have stalled and Iranian raw materials are expected to flood the market after U.S. President Donald Trump pass by.
But signs of breaking OPEC-plus compliance at the margins may be more common, and a fight against continued production restrictions highlights the persistence of fault lines that briefly broke the alliance last year.
Russia, Iraq, Nigeria and Kazakhstan want to ramp up production. But $ 65 prices are enough to tempt any gin in the 23-member alliance to exceed its quota. Russia, for example, does not want to see prices near $ 80 and believes a range between $ 45 and $ 60 is best for mitigating volatility.
However, the market believes that the situation is controlled by the Saudi-Russian-led OPEC-plus alliance. The bulls are firmly in the driver’s seat right now.
Sachs Goldman
GS
While the balance has returned to crude markets, the same cannot be said for reformed products – although they are starting to turn the corner as well. Price fluctuations are moving toward pre-pandemic levels and flat curves indicate that productive investments are draining. It’s not tight but there’s not much more.
It took the raw market four months from the first tight signals – from mid-October to mid-February – to show its full strength. That could be an ambitious template for revamped products, which have seen just eight months of investment drawdown and still have about 400 million more barrels in tanks than their pre-release levels.
Rebalancing raw materials was an easier task than reconstituted products. In the crude market the regulated Opec-plus alliance is holding back supply. The same is not true of global brewers.
The product market received a blow from Winter Storm Uri. It pushed production stocks down 20 million barrels below pandemic levels. The U.S. market has rebalanced as much as it could. Europe still has a surplus – mostly diesel – while the surplus of large produce, built on cheap raw bought last year, is in Asia. This allows for slow and steady drainage – but prevents overgrowths and raw producers from opening the taps. And at the end of the day, raw prices get their strength from physical demand from refiners.
At 95 million barrels per day, consumer demand for recycled products in the first quarter of 2021 remains down some 5 million barrels per day from the previous year’s level in the same period. And tuberculosis is still going against headaches with the resurgence of the pandemic.
But vaccines are showing encouraging results, more stimulus is on the way, and most of the demand forecasts for the second half of the year are growing. At the end of 2021, demand may only be 2 million barrels per day below the end-2019 level, which is impressive considering where things stood in the spring of last year.
Oil prices may be breathing from time to time from now on, but the general trend is up unless OPEC-plus regulation completely resolves.
Demand will improve as investments in upstream projects have continued to grow since 2015 and took a 30 per cent dive in 2020. Oil companies’ budgets point to another decline in upward spending. -year, which means that the new supply outlook is weak.
The possibility of a supply crisis reaching the end of 2022, spewing prices above $ 100 per barrel again, looks more reasonable every day.
The U.S. rock sector is flat and more and more international oil companies are moving towards renewable energy projects and away from traditional oil investments – while demand appears to be poised to go ahead. back to pre-release levels.