Crude inventories in the U.S. are falling at the fastest rate in decades, while shale producers are remaining disciplined with their spending and won’t overwhelm OPEC, ConocoPhillips Chief Executive Officer Ryan Lance said on Wednesday. In another bullish sign, TotalEnergies SE, one of Europe’s biggest refiners, bid for benchmark Forties crude at the highest premiums in 17 months.
“We absolutely think prices are going to continue to rally, especially if OPEC adds anything up to 500,000 barrels per day,” Amrita Sen, chief oil analyst at consultant Energy Aspects, said in a Bloomberg Television interview. “It’s a drop in the ocean.”
“Anything less than a 500,000-barrel-a-day supply increase in August will be enough to see the bulls push the market higher,” said Warren Patterson, head of commodities strategy at ING Group in Singapore. “While there are concerns over rising cases of the delta variant in some regions, the market is doing a good job at ignoring it for now.”
The market agrees: not only are spot prices surging, but WTI prompt backwardation surged, with the nearest timespread touching $1 a barrel intraday, rising as much as 30c, the strongest since September 2019, and trading at 86c as of 7:33am New York time, an indication the market sees supply deficits extending for a long time.
Some secondary details ahead of the completion of today’s OPEC+ meeting expects non-OPEC members Kazakhstan, Oman, Brunei to compensate 490k BPD until the end of September. So far, Russia has not offered any plans for compensation. Among the OPEC members, Iraq, Guinea and Gabon are expected to compensate a total of 960k BPD.
And while the surging oil prices is great news for the likes of the world’s biggest oil producer Russia, and Vladimir Putin, it may not be so great for US consumers as the average US gas price is set to rapidly approach $4.