$70 Oil Still Well Within Reach

The $70 per barrel Brent oil price threshold is still well within reach as we approach the strong summer demand season.

That’s what Rystad Energy Oil Markets Analyst Louise Dickson said in a statement sent to Rigzone on Tuesday, adding that summer seasonal demand trends will be amplified as economies reopen and demand for refined products, particularly gasoline, improves.

“This is why Brent, despite weakness in early [Tuesday] trading, is still near $68 per barrel, despite the bearish weight of an expedited Iran nuclear deal,” Dickson told Rigzone on May 25.

“If demand evolves as the market expects and more oil is consumed during the summer season, prices can grow and remain high, offering producers a healthy environment to consider boosting their production,” the Rystad Energy analyst added.

In the statement, the Rystad Energy representative projected that oil demand growth will not “take off” until the third quarter of this year, after which it will climb from a current level of 92.1 million barrels per day to reach 98.2 million barrels per day by December.

“The planned additional two million barrels per day of supply from OPEC+ by July 2021 will still not be enough to meet our forecasted demand uptick, therefore there could be a call on the group to produce more, especially in the peak demand month of August,” Dickson added.

“If OPEC+ doesn’t increase production further, the summer demand gap could be filled by Russia, or even by Iran, which is reportedly planning to start exports from its one million barrel per day Jask terminal starting in June 2021,” Dickson continued.

Although U.S. production will increase going forward, it will not be able to meet the global supply gap, Dickson pointed out.

“We expect a gradual increase in U.S. crude and condensate production in the coming months from the current 11.15 million barrels per day to 11.3 million barrels per day in June 2021, mainly driven by the Permian and Eagle Ford basins, but this will not be enough to balance the entire global market,” Dickson said.

Dickson noted that the bearish fumes of the prospect of a nuclear deal with Iran may have run their course and said the reality of an extra one million barrels per day or more has been gradually priced in since diplomatic representatives began meeting in Vienna this year.

At the time of writing, the price of Brent crude stood at $68.63 per barrel.

To contact the author, email andreas.exarheas@rigzone.com