Oil drops again on OPEC surplus warnings as analysts disagree on market outlook
But lack of investment seems to guarantee tight supplies in the short term, says Vitol: File Image / Pixabay
Crude trading on the we Thanksgiving Thursday ended with smaller losses for two key landmarks, in the aftermath of the Organization of Petroleum Exporting Countries (OPEC) warning that the effort by several countries to free up supplies from their emergency reserves would inflate surplus stocks next year.
OPEC said earlier that if the United States, Japan, and four other countries publish 66 million barrels of oil over a two-month period as expected, the surplus in world markets would increase by 1.1 million barrels per day (bpj) in January and February at 2.3 million and 3.7 million per day respectively.
Andrew Lipow, president of Lipow Oil Associates, noted that “Considering the vacations in the United States and with light (trading) volumes, I think the market is digesting the releases that we have seen announced and wondering what reaction we might see from the ‘OPEC +. “
I think oil futures prices will rise above spot prices
Marwan Younes, Massar Capital Management
Tamas Varga, analyst at brokerage PVM, noted: “The decision of the six consumer countries will surely lead to aftershocks as the dividing lines between OPEC + and the main consumer countries become more and more visible.”
West Texas Intermediate fell on Thursday 35 cents To $ 78.03 per barrel when trading stops for Thanksgiving; Brent settled 3 cents lower at $ 82.22 per barrel.
OPEC’s argument for not increasing production – which prompted the decision to release oil from various strategic oil reserves – is that the recovery in demand still risks further government shutdowns of Covid.
Indeed, Bloomberg reported that the resurgence of profitability enjoyed by oil refiners in Asia earlier this year slipped from recent highs in November as the return of some Covid-related travel restrictions in China has had a negative impact on jet fuel consumption, and as the recent panic over the lack of heating fuels in winter has proven to be exaggerated.
However, an overview still sees oil shortages and corresponding price spikes, mainly due to a lack of investment in future supply: Vitol Group noted that the number of oil and gas drilling rigs around the world is declining by about 30 percent compared to pre-pandemic levels, although demand has recently returned to pre-pandemic levels.
Marwan Younes, director of investments at Massar Capital Management, said: “I think oil futures prices will rise beyond spot prices.”
As for perceived barriers to demand from Asia, they may also turn out as concern over winter heating fuels being grossly exaggerated: Reuters said on Thursday that the region’s crude oil imports are expected to have rebounded. in November to reach their highest level this year (at 2.95 million bpj) and globally “reflect stronger demand before winter and an ongoing recovery after the worst of the coronavirus pandemic”.