OIL PRICE TALKING POINTS
The price of oil trades back above the $70 handle even as the Organization of Petroleum Exporting Countries (OPEC) stay on track to boost “overall production by 0.4 mb/d for the month of October 2021” as signs of stronger demand are met with limited supply.
FUNDAMENTAL FORECAST FOR OIL PRICE: BULLISH
The decision by OPEC to retain the current course for crude output should keep the price of oil afloat as the most recent Monthly Oil Market Report (MOMR) emphasizes that “world oil demand growth in 2021 remains unchanged from last month’s assessment, showing growth of 6.0 mb/d despite some offsetting revisions.”
At the same time, the MOMR points out that “in 2022, oil demand is expected to robustly grow by around 4.2 mb/d, some 0.9 mb/d higher compared to last month’s assessment,” and it remains to be seen if OPEC and its allies will ramp up production over the remainder of the year as White House National Security Advisor Jake Sullivan insists that “OPEC+ must do more to support the recovery.”
In turn, projections for stronger demand may prop up the price of oil throughout the remainder of the year as OPEC and allies remain reluctant to push production towards pre-pandemic levels, and developments coming out of the US maykeep oil prices afloat amid the tepid recovery in crude output.
Recent figures from the Energy Information Administration (EIA) show weekly field production recovering from the disruptions caused by Hurricane Ida as output climbs to 10,600K from 10,100K in the week ending September 10, but the US remains far from the conditions seen prior to COVID-19 as weekly output reached a record high of 13,100K in March 2020.
With that said, current market conditions may keep the price of oil afloat throughout the remainder of the year as expectations for stronger consumption are met with indications of limited supply.
David Song, Strategist ,Daily FX
4 October 2021