Plenty of Bullish Confidence in Oil Market

There is plenty of bullish confidence in the oil market currently.

That’s according to Rystad Energy’s oil markets analyst Louise Dickson, who noted that “trading excitement” often drives the market just before OPEC+ meetings.

“There is confidence that the oil producer group will demonstrate supply restraint at its meeting on Tuesday,” Dickson said in a statement sent to Rigzone on Monday.

“Moreover, the recovery of oil demand appears to be on track at a global level, which lends extra support to prices and for now makes up for any potential downside stemming from the Iran nuclear deal negotiations,” Dickson added.

“Nevertheless, a final decision in Vienna this week could bring some downward turbulence to oil prices but the impact should be mild as the oil market has had months to gradually start to price in the probability of an earlier return of Iranian oil supply to the market,” the Rystad Energy representative added.

Dickson highlighted that in the company’s base case, Rystad Energy expects Iranian oil (crude and condensate) supply will reach 3.3 million barrels per day by the end of 2021 and rise towards four million barrels per day in the first half of next year.

“An earlier than expected return of Iranian barrels would see an acceleration towards these milestones, with perhaps as much as one million barrels per day returning over a four month period,” Dickson said.

“If this early Iran barrel scenario were to materialize, the market would be able to absorb the mini supply shock as economies pull out from lockdown and oil demand normalizes,” Dickson added.

“An early Iran deal would therefore not disrupt the bullish cycle we anticipate for the remainder of the year but would be a bump in the road,” Dickson went on to say.

Looking at fundamentals, Dickson highlighted that the market is now facing the exact opposite dilemma of April last year.

“Instead of a spiraling downwards demand shock that forced upstream shut-ins, producers now have just as delicate of a task to bring back enough supply to match the swiftly rising oil demand,” Dickson said.

“A failure to keep up with oil demand would overheat an already tight oil market and cause a very volatile upward price gyration,” the Rystad Energy representative warned.

At the time of writing, the price of Brent crude stood at $70.87 per barrel.

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