Bullish Sentiment Likely Has Steam Left

The bullish sentiment in the oil market likely has some more steam left in it.

That’s according to Rystad Energy’s oil markets analyst Louise Dickson, who said there are still indications that oil prices can surge higher.

“The trading volume of Brent contracts is only at 267,000, still far below the all-time high of 348,000 in late February 2021, when the market was clearly ‘overbought,’” Dickson said in a statement sent to Rigzone on Wednesday.

“The relatively low trading volumes of contracts indicate that there is still upward potential for oil prices, and that the $73 per barrel price is not just a frothy tendency,” Dickson added in the statement.

If oil prices continue their ascent, they will eventually trigger a stronger production response, Dickson highlighted.

“So far this year, U.S. shale supply has been quite unresponsive to higher oil prices as operators focus on cash flow instead of production volumes,” Dickson said.

“U.S. oil production likely recovered to 11.2 million barrels per day in March, and we expect a gradual increase in the coming months, mainly driven by the Permian and Eagle Ford basins, with the potential to grow towards 11.6 million barrels per day by the end of 2021,” Dickson added.

“However, this will not be enough to balance the entire global market, so other supply responsiveness will be called upon, in particular, from OPEC+,” the oil markets analyst continued.

Dickson noted that OPEC+ has increasingly more room to increase production, adding that Rystad Energy’s crude-supply demand balances indicate a two million barrel per day deficit in the market for July.

At the time of writing, the price of Brent crude oil stood at $72.20 per barrel. Week on week, the Brent oil price has risen consecutively since May 16, when it closed at $66.44 per barrel.

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