The market is gradually beginning to give credence to something I’ve been discussing in past OilPrice articles for a long time now. In a June, 2020 article entitled, Underinvestment Could Send Oil Prices Soaring, I argued how the retrenchment and lack of capital investment the industry has seen the past five-years would lead to shortages of crude eventually. The huge volume of Saudi overproduction exacerbated the equal largess in American shale for the past couple of years, and led to a glut of crude globally.
EIA-WPSR The blue line shows weekly storage numbers beginning to edge back into the five-year range.
We are now starting to work off this glut as noted in the weekly EIA petroleum status report above, and the day of reckoning I forecast in June is just around the corner, a few months hence at most. Even the news in July that OPEC+ would start restoring as much as two-million BOPD through the end of the year, failed to quiet the unease beginning to take hold in the market. News like that would have sent prices into the cellar in May, having left the current contracts above $41 for WTI and near $45 for Brent.
Take the two bullets below to the bank.
- Supplies of crude oil are going to drop, just as demand is on the increase.
- Oil prices are going to continue advancing higher.
In the rest of this article we will give a forecast of where we see end-of-year U.S. daily production and the impact that will have on prices for the two most closely followed benchmarks, WTI, and Brent. (By David Messler, OilPrice.com)