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OPEC Once Again Lowers Oil Demand for 2021

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OPEC Once Again Lowers Oil Demand for 2021

The Organisation of Petroleum Exporting Countries (OPEC), projected yesterday that world oil demand in 2021 will rebound more slowly than previously thought but added that it will pick up in the second quarter of this year.

The international oil cartel also forecasted that the prevailing rise in oil prices could brighten early economic recovery for the country, resulting in a medium-term Gross Domestic Product (GDP) expansion.

In its monthly report for February, OPEC projected that demand will rise by 5.79 million barrels per day (bpd) this year to 96.05 million bpd, trimming its growth forecast by 110,000 bpd from a month ago.

The prospect of weaker demand has already prompted OPEC and its allies, known as OPEC+, to slow their plan to boost output.

But more demand, rising prices, and lower rival supply could support the case for more easing, even as Iraq said on Wednesday OPEC+ was likely to keep current cuts in March.

“While the global economy is showing signs of a healthy recovery in 2021, oil demand is currently lagging but is forecast to pick up in the second half of 2021,” OPEC said in the report.

OPEC has steadily lowered its 2021 oil demand growth forecast from 7 million bpd expected in July. Still, the latest forecast is stronger than the prediction made in an earlier internal OPEC report.

The group raised its forecast of world economic growth this year to 4.8 per cent from 4.4 per cent previously, despite the impact of “challenges” such as COVID-19 variants and the effectiveness of vaccines.

“The global vaccination rollout is gaining pace, infection rates are falling in some areas, improvements in treatment, and the growing use of rapid testing facilities all lend support to an acceleration of economic activity after the first quarter,” OPEC said.

On its forecast for Nigeria, it stated: “The meaningful rise in of oil prices following the recent Declaration of Cooperation (DoC) decisions, along with a positive trajectory from COVID-19 vaccines, could brighten the 2021 outlook and lay the groundwork for a hopeful medium-term real GDP expansion.

“Moreover recent data showed that consumer confidence in Nigeria increased to 14.80 points in 4Q20 from -21 20 points in 3Q20.

“ However, recent Central Bank of Nigeria composite Purchasing Managers Index (PMI) for the manufacturing sector edged down to 49.6 in December 2020 from 50.2 in November, signaling a renewed contraction in the country’s manufacturing activity.”

For shale, OPEC trimmed its non-OPEC supply growth forecast to 670,000 bpd this year from 850,000 bpd previously, and said output of U.S tight crude, another term for shale, would decline despite higher oil prices.

“Supply from the U.S. is challenged by short-term uncertainties around COVID-19 (and) continued capital expenditure discipline leading to lower upstream capital spending by U.S. oil companies,” OPEC said.

Last month, OPEC raised its forecast for U.S. shale output this year, in a sign higher oil prices were helping a key competitor.

OPEC+ producers cut supply by a record 9.7 million bpd last year to support the market and agreed to pump an extra 500,000 bpd in January under a plan to unwind the curbs gradually. Most producers are returning to supply restraint this month and in March.

OPEC crude production in January rose by 180,000 bpd to 25.50 million bpd, the report said, led by Saudi Arabia, Iran, and Venezuela. This is less than the 300,000 increase allowed under the OPEC+ plan for January.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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