Oil Market Headwinds and Tailwinds: And The Winner Is…?
Oil prices have increased by 50% since the beginning of the year, with Brent crude reaching $75 per barrel this summer. Circumstances changed in mid-July when OPEC+, after two weeks of haggling, reached a deal to boost production by 400,000 boepd every month starting in August, with the baseline being increased for some countries. At the same time, the accelerated spread of virus mutations in recent months has stoked fears that the global economic recovery could be delayed and oil demand growth could be slowed. This, coupled with signs of increasing inflation risks, caused stock markets and oil prices to contract.
The tables have thus turned considerably since June, when numerous analysts predicted that oil prices could again hit $100 per barrel – possibly as soon as during the second half of this year – propelled by a rapid restoration of demand combined with a depletion of global storage levels and under-investment in supply.
The jury is still out but a verdict will soon emerge on which side will prevail in the second half: oil price headwinds or tailwinds?
In addition to the factors listed above, key wildcards include OPEC+ compliance and the extent to which US shale producers will respond to higher oil prices by boosting production. The way forward for oil prices becomes even more difficult to predict when factoring in the ongoing energy transition – with traditional E&P players pursuing M&A transactions to streamline their portfolios – along with ESG considerations, more stringent government legislation, and the capital distribution demands of investors and financial markets.
For an insightful assessment of our latest data, tune into ‘Rystad Talks Energy’ this Thursday 29 July, to be broadcast from Singapore and hosted by our regional Asia-Pacific team. We welcome you to join us for discussions and analysis of the key issues currently shaping global energy markets.