OPEC said it remains cautious about the demand outlook, but the OECD has just doubled its forecast for US economic growth for 2021 from 3% to 6% and only in the span of two months. This is largely based on the fiscal stimulus bill passing in Congress and a largely successful vaccination rollout. That growth is going to have a positive spillover effect on the rest of the world and especially on the US’ trade partners Canada and the EU. Together with what OPEC did last week, this is exercising upward pressure on prices.
If OPEC+ had stuck to their original schedule set in April 2020, by now we would have around 5 million barrels a day (Mb/d) to be relaxed through to April 2022. Instead, we have an extra 3 Mb/d that they’re going to roll over for several months to come. At some point, they will have to relax production – when there’s a combination of high prices and massive spare capacity, discipline weakens.
And despite the more conservative outlook for shale, investment decisions are never black or white. There are aggressive investors who are more risk takers than others, and when prices increase, they won’t just sit back and watch.
Dr Nakhle is joined by Peter McGuire, CEO of XM Australia, and Andrei Belyi, PhD, Professor, Founder & CEO, Balesene OÜ today’s Live Weekly Energy Transition Dialogues. Sean Evers, Managing Partner, Gulf Intelligence, moderates the discussion.
“New Opportunities 2021: Some optimism for oil markets“, Dr Carole Nakhle, Feb 2021
“Oil markets and volatility in prices“, Dr Carole Nakhle, Mar 2021
“OPEC’s decision to keep output unchanged and oil markets“, Dr Carole Nakhle, Mar 2021
“Global Economy and Energy Markets Weekly Commentary – 7th Mar ’21“, Christof Rühl, Mar 2021