Oil Tests The $41 Level As Norway’s Johan Sverdrup May Get Shut Down Due To StrikeOil gains ground amid worries about tighter supply in the upcoming weeks.
Oil Video 08.10.20.
Strike In Norway Pushes Oil Closer To The $41 Level
Oil is on the move today amid risks that Norway’s Johan Sverdrup oilfield may be shut down due to strike.
We have already discussed the strike in Norway at the beginning of this week. At that time, the strike was projected to cut the country’s oil production capacity by about 330,000 barrels of oil equivalent per day (boepd).
Johan Sverdrup can produce about 470,000 barrels of oil per day (bpd). In addition, other oilfields may also be affected by the strike, and the current estimate of the potential production shutdown is 966,000 boepd.
This is a significant quantity for the oil market so it’s not surprising that oil is trying to settle above the $41 level. In addition, U.S. domestic oil production will take a temporary hit due to Hurricane Delta which forced the evacuation of offshore platforms.
The recent EIA Weekly Petroleum Status Report indicated that U.S. oil production increased from 10.7 million bpd to 11 million bpd but it will reverse course due to the impact of the hurricane.
A combination of a strike in Norway and hurricane-related shutdowns in the U.S. create a good setup for a decline in inventory levels in the upcoming weeks.
OPEC Believes That Oil Demand Will Grow To 109.1 Million Bpd By 2045
OPEC has just released its 2020 World Oil Outlook in which it shared its view on the trajectory of oil demand recovery.
According to OPEC, oil demand will continue to recover and reach the level of 103.7 million bpd by 2025. This growth will be driven by demand from non-OECD (Organisation for Economic Co-operation and Development) countries, while demand from the developed world will decline by 1.1 million bpd between 2019 and 2025.
Interestingly, OPEC believes that world oil demand will increase by 9.4 million bpd compared to 2019 levels and reach 109.1 million bpd by 2045 despite the fact that demand from OECD countries would be lower by 13 million bpd by that time.
OPEC believes that the increase in global oil demand will be driven by the petrochemicals sector, aviation and road transportation. Put simply, OPEC does not think that electric vehicles will make their way to the developing countries by 2045.
In short, OPEC presented the most bullish outlook among those that we have seen during the current crisis. It remains to be seen whether the general market mood will improve because OPEC is not bearish on oil unlike other major oil producers, but OPEC’s view is certainly a breath of fresh air for long-term oil bulls who are tired of looking at gloomy predictions.
For a look at all of today’s economic events, check out our economic calendar.