Crude oil prices are showing confidence in growing oil demand in part because OPEC+ is as well. OPEC+ has skipped all the drama and decided to follow through on a gradual increase in production because, despite the hit from another wave of Covid in India, the re-opening trade is getting harder for oil traders and OPEC plus to ignore. Goldman Sachs is not ignoring it and is calling for the, “biggest jump in oil demand in history projecting a 5.2 million barrel a day increase in just the next 6 months mb/d rise, 50% larger than the next largest increase over that time frame since 2000. They also see the super cycle commodities rallying another 13.5% with oil hitting $80.00 a barrel with risks to the upside. This of course agrees with what I have been saying for months and it’s good to get support. Even my calls for an oil and commodity super-cycle are being embraced by mainstream thought.
OPEC+ is not going to change its plans for modest production increases from May to July. Reuters reported that OPEC+, which is responsible for more than a third of global production, has cut output by around 8 million barrels per day (bpd), equivalent to over 8% of global demand. The reduction includes a 1.0 million bpd voluntary cut by Saudi Arabia. At the Apr. 1 meeting, the group agreed to bring 2.1 million bpd back to the market from May to July, easing cuts to 5.8 million bpd. In a report by OPEC plus experts, the group forecast global oil demand in 2021 would grow by 6 million bpd, after falling 9.5 million bpd last year. But the group said that even though more than 1.0 billion covid-19 vaccine doses had been administered globally, it was concerned that surges in new virus cases in India, Brazil, and Japan might derail recovering demand for crude.
Oil prices did not seem fazed by a reported +4.319 million barrel increase in crude supply. Perhaps it was because that gasoline supply was down by 1.288 million barrels and distillates down by 2.417 million barrels. The was also a release from the Strategic Petroleum Reserve that made the crude build larger than it would have been. The EIA today may give us direction.
The oil market will also look to the Fed for direction. The market wants to get a sense of whether the Fed is worried about inflation. Rising commodity prices are getting harder for the Fed to ignore!
Crude oil traders must wonder whether we are going to switch from being a net petroleum exporter to an importer next year. Biden’s drilling moratorium as well as his disdain for oil, unless it comes from Iran, is of concern. Still the EIA reported that energy exports from the United States exceeded imports by 3.4 quadrillion British thermal units (quads) in 2020, the largest margin on record, according to EIA’s Monthly Energy Review. U.S. energy exports totaled 23.4 quads, nearly equaling the record high set in 2019, and energy imports fell 13% to 20.0 quads, the lowest level since 1992. The United States exported more energy than it imported for the second consecutive year. Hey, will that change in 2021?