Oil Price Fundamental Daily Forecast – Underpinned as OPEC+ Supply Falls Short of Rising Global Demand
U.S. West Texas Intermediate and international-benchmark Brent crude oil futures are trading mixed on Tuesday after yesterday’s surge drove the markets to within striking distance of multi-year highs reached last week. Underpinning the markets are increased demand from the global economic recovery and signs that supply from OPEC and its allies may be falling short of expectations.
OPEC Oil Output Rise in October Undershoots Target – Survey
The increase in OPEC’s oil output in October fell short of the rise planned under a deal with allies, a Reuters survey found on Monday, as involuntary outages in some smaller producers offset higher supplies from Saudi Arabia and Iraq, Reuters reported.
The Organization of the Petroleum Exporting Countries (OPEC) pumped 27.50 million barrels per day (bpd) in October, the survey found, a rise of 190,000 bpd from the previous month but below the 254,000 increase permitted under the supply deal.
The OPEC+ agreement allowed for a 400,000 bpd production increase in October from all members, of which about 254,000 bpd is shared by the 10 OPEC members covered by the deal, OPEC figures seen by Reuters show.
With output undershooting the planned increase last month, OPEC’s compliance with its pledged cuts increased to 118% in October the survey found, from 114% a month earlier.
OPEC+ meets on Thursday to review its policy and is expected to reconfirm its plans for monthly increases.
Kuwait, Iraq Back OPEC+ Oil Supply Rise Plan, Despite Calls for More
Kuwait and Iraq support sticking to plans to raise oil output by 400,000 barrels per day (bpd) at an OPEC+ meeting on Thursday, as the U.S. called again for extra supply to cool rising prices.
Kuwait’s oil minister Mohammad Abdulatif al-Fares said on Monday that the OPEC member supports the plan to raise output, which would ensure adequate crude supply to balance the global market, state news agency KUNA reported.
Iraq’s state oil marketing company, SOMO, said on Saturday that the OPEC member sees raising output as already planned was sufficient to meet demand and stabilize the market.
U.S. President Joe Biden on Saturday urged major G20 energy producing countries with spare capacity to boost production to ensure global economic recovery, Reuters reported.
As long as the supply generated from OPEC+ falls short of demand, the crude oil market will remain well supported. This may be enough to produce a steady climb in prices. The bullish wildcards like fuel switching in Europe and Asia are the events capable of triggering upside spikes.
The focus the next two days now shifts to U.S. supply. Traders will be particularly interested in fuel demand and the Cushing, Oklahoma supply. Gains could be limited this week if the American Petroleum Institute (API) or Energy Information Administration (EIA) reports show another rise in crude inventories. Analysts in a Reuters poll see an increase of 1.6 million barrels.