Oil Market Snapshot – November 2021

  • Brent is trading c. $71/bbl at the end of November, down $13/bbl from the end of October
  • The decline is primarily due to COVID news, both from further lockdowns in Europe and the discovery of the omicron "variant of concern"
  • A US-led effort at coordinated stock releases by consumer countries has also had an impact, though relatively uncoordinated
  • The collapse has substantially raised the probability of an OPEC+ deviation from its quota schedule, but the December meeting's outcome is still difficult to call
  • Our Brent annual average forecast is unchanged at $71.30/bbl in 2021. We see prices rising in 2022 to $72.58/bbl (-$0.51/bbl on previous), though we still expect significant volatility
  • With the year almost over, our 2021 demand growth forecast is unchanged at 5.54 million b/d. For 2022, the EIA and IEA expect demand growth in the region of 3.4 million b/d
  • Downside demand risks remain, but without further information on the omicron variant, estimating its effect is intractable
  • We trim our 2021 supply growth forecast to 1.5 million b/d (-80,000 b/d on previous). Petrobras has raised cape...

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Oil Market Snapshot – October 2021

  • Brent closed at c. $84.32/bbl on the 28th October, up c. $6/bbl on where it was at the end of September, though easing by a couple of dollars on news of renewed US-Iran nuclear negotiations
  • We raise our Brent annual average forecast to $71.30/bbl in 2021 (+$2.09/bbl on previous)
  • We see prices rising in 2022 to $73.09/bbl (+$2.37/bbl on previous), though we expect significant volatility
  • Our 2021 demand growth forecast rises to 5.54 million b/d (+250,000 b/d on previous), incorporating potential gas-to-oil fuel switching, primarily in Asian economies
  • Still, supply bottlenecks and rising prices, particularly in energy, combine with COVID to provide downside risks to demand
  • The IMF has recently decreased its estimates of global GDP growth for both 2021 and 2022, for example
  • We raise our 2021 supply growth forecast to 1.58 million b/d (+70,000 b/d on previous) as various outages are easing, most notably in the US and Nigeria
  • We see the market in deficit by 2.03 million b/d in 2021, while a surplus of 1.06 million b/d will occur in 2022 if OPEC+ unwinds on schedule
  • As the OPEC+ unw...

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Oil Market Snapshot – September 2021

  • Brent is trading around c. $79/bbl with 16% of US GoM production still out after Hurricane Ida, buoyed also by runaway natural gas prices
  • We raise our Brent annual average forecast marginally to $69.21/bbl in 2021 (+$0.54/bbl on previous)
  • We see prices rising in 2022 to $70.72/bbl (-$0.63/bbl on previous), capped around $70 by OPEC's active management
  • Our 2021 demand growth forecast eases to 5.29 million b/d (-100,000 b/d on previous), due to COVID concerns and slower growth in China
  • We decrease our 2021 supply growth forecast to 1.51 million b/d (-240,000 b/d on previous) due to the various outages currently in place in the US, Nigeria and elsewhere
  • Steady LTO activity has drawn down the stock of drilled but uncompleted wells
  • We see the market in deficit by 2 million b/d in 2021, 260,000 b/d larger than previous due to the supply outages currently affecting the market
  • For 2022, a surplus of 650,000 b/d will occur if OPEC+ unwinds on schedule, so we expect OPEC+ to debate deviating from its schedule some time in the next year to maintain prices
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Oil Market Snapshot – August 2021

  • Brent is back trading at c. $70/bbl after a weeklong collapse to the mid-60 level on weaker demand data and rising COVID infections in the US and China
  • We increase our Brent annual average forecast marginally to $68.67/bbl in 2021 (+$0.39/bbl on previous), due to a sustained spell above $70/bbl in recent months
  • We see prices rising in 2022 due to continued OPEC+ market management
  • Our 2021 demand growth forecast eases to 5.39 million b/d (-30,000 b/d on previous), due to COVID concerns and slower growth
  • We increase our 2021 supply growth forecast to 1.75 million b/d (+130,000 b/d on previous) on a brighter outlook for US LTO, though production will still decline there on average
  • A recovery in LTO production has started a little earlier in the year than expected, so firm growth in 2022 is now even more likely
  • The rig market has seen demand increase, but operators are still in the driving seat, locking in low rates with long contracts
  • We see the market in deficit by 1.74 million b/d in 2021, with supply growth undoing not even one third of the decline in 2020
  • For 2022, a surplus of 1.34 ...

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Oil Market Snapshot – July 2021

  • Brent is now trading around $74/bbl, after a 10% drop of $7.72 and recovery after the next phase of the OPEC+ deal was announced, with firm demand and slow production growth supporting prices
  • We increase our Brent annual average forecast to $68.28/bbl in 2021 (+$1.54/bbl on previous), with fundamentals still pointing to firm prices
  • Our 2021 demand growth forecast falls to 5.42 million b/d (-570,000 b/d on previous) on demand data downward revisions
  • Demand growth will still outpace production growth, but the pace of recovery appears to be slowing according to the latest data from China
  • We decrease our 2021 production growth forecast to 1.62 million b/d (-1.35 million b/d on previous), as OPEC+ opts for a cautious cuts taper and other producers struggle to add barrels
  • The talks on revival of the Iranian nuclear deal will not continue until the new president is inaugurated in early August, while Iran has started exporting from its new Jask terminal, potentially allowing production to rise
  • We see the market in deficit by 1.66 million b/d in 2021, offsetting most of last year's surplus
  • Dee...

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Oil Market Snapshot – June 2021

  • Brent has risen to above $75/bbl, after a dip to $72/bbl when the US Federal Reserve indicated it may raise interest rates to counter inflation
  • Still, we increase our Brent annual average forecast to $66.74/bbl in 2021 (+$2.51/bbl on previous) as the fundamentals remain price constructive
  • Our 2021 demand growth forecast rises to 5.99 million b/d (+250,000 b/d on previous), as generally positive demand data and falling inventories overmatch some non-OECD weakness
  • Global inventories may well be back at the pre-2020 five year average, while global economic data and revisions continue to be relatively positive
  • We decrease our 2021 supply growth forecast to 2.94 million b/d (-30,000 b/d on previous), as delays and maintenance combine with low capex to prevent a full supply recovery, again supporting prices
  • The reconstruction of the Iranian nuclear deal has hit some snags, potentially delaying the return of Iranian production further
  • OPEC+ looks set to continue along a cautious path in its cuts taper, with some countries like Angola unable to return lost production
  • We see the market in defi...

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Oil Market Snapshot – May 2021

  • Brent is trading c. $69/bbl, with traders focussed on the relative firmness of OECD demand
  • We increase our Brent annual average forecast to $64.23/bbl in 2021 (+$0.38/bbl on previous) on this basis, though risks to demand remain
  • Our 2021 demand growth forecast falls slightly to +5.74 million b/d (-290,000 b/d on previous), as we downgrade the outlook for India due to COVID
  • New daily cases in India appear to have topped out at c. 400,000 b/d, but the country will continue to struggle for a while yet
  • Different variants pose a risk to OECD demand, as many countries are relaxing restrictions
  • Progress on a revival to the Iranian nuclear deal means a lifting of US sanctions could occur soon, allowing c. 500,000 b/d of exports from storage back on the market, but production will lag
  • We decrease our 2021 supply growth forecast to 2.97 million b/d (-150,000 b/d on previous), with capex limited and a disciplined OPEC+ cuts taper currently expected
  • This lower spending has improved most operators margins, but at the expense of production
  • We see the market in deficit by 640,000 b/d in 2...

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Oil Market Snapshot – April 2021

  • Brent is trading c. $66/bbl, even as OPEC+ commits to unwinding cuts and India and Brazil are ravaged by COVID-19
  • We increase our Brent annual average forecast to $63.85/bbl in 2021 (+$3.84/bbl on previous), with increasing IMF GDP growth estimates underpinning a better demand outlook
  • Our 2021 demand growth forecast rises slightly to +6.03 million b/d (+150,000 b/d on previous), as the US recovery currently outweighs the effects of India and Brazil
  • OPEC+ surprised the market on 1st April by announcing an unwind of its cuts, nominally returning 2.1 million b/d over the next three months
  • This bodes well for the continuance of the group, as it will bring Russian and Saudi quotas back to parity, easing political tensions
  • Deepwater exploration continues to recover and will pick up markedly in 2H21, with fixture rates improving in many basins
  • We nevertheless decrease our 2021 supply growth forecast to 3.12 million b/d (-200,000 b/d on previous), as delays to project start-ups in Brazil weigh
  • We see the market in deficit by 690,000 b/d in 2021, as demand recovers two thirds of its 2020 losse...

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Oil Market Snapshot – March 2021

  • Rising sharply after the March OPEC+ meeting's surprise result, Brent is now trading c. $63/bbl, having flirted with $60/bbl on fresh European lockdowns before the EverGiven got stuck in the Suez Canal
  • Despite this, we increase our Brent annual average forecast to $60.01/bbl in 2021 (+$3.05/bbl on previous), due to the initially firmer prices post-meeting and a likely slower OPEC+ unwind
  • Our 2021 demand growth forecast rises slightly to +5.88 million b/d (+50,000 b/d on previous), on the expectation that restrictions in the OECD give way to economic recovery from 2Q20
  • In the immediate future, further restrictions slow the demand recovery in Europe, while delays to the vaccine rollout there may exacerbate the situation
  • After surprising the market by holding most quotas unchanged last month, we expect a similar result in OPEC+'s April 1st meeting
  • This would continue a trend of Russia getting the best of it at the negotiating table, as it continues to gain market share while extra Saudi cuts support prices
  • IEA projections see oil demand growing steadily through to 2026, though by ever smaller amoun...

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Oil Market Snapshot – February 2021

  • Brent started February at $56.30/bbl and ends it above $65/bbl, with inventories continuing to draw and the Texan cold snap temporarily hitting Permian production
  • We see Brent averaging $56.96/bbl in 2021 (+$3.37/bbl), with likely some downward pressure on prices from mid-year as production starts to respond and OPEC+ cuts unwind
  • Our 2021 demand growth forecast is unchanged at +5.83 million b/d, with ongoing restrictions in the OECD giving way to economic recovery from 2Q20
  • Globally, COVID cases are declining after their most recent peak. New vaccine-resistant COVID variants may pose a risk to this, but virologists suggests such a risk is relatively small
  • The majors had an unsurprisingly poor 2020, collectively losing money every quarter accompanied by large asset writedowns for many, but not all majors will increase capex in 2021
  • Strengthening prices make a quota increase at 4th March's OPEC+ meeting very likely, though there will have to be compromises made to keep the deal together
  • As shale stutters, deepwater gathers momentum, with Latin America continuing development and Norwegian COVID tax breaks pro...

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