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OILUKMAY21 – Brent Crude Oil (May)
OILUSAPR21 – WTI Crude Oil (April)
Crude oil continues to show signs of having reached its short-term potential with the return to the lower end of its current range being driven by a combination of rising US bond yields ahead of today’s FOMC meeting and after the International Energy Agency toned down the potential for a super-cycle in crude oil.
In their latest monthly Oil Market Report, the IEA raised questions about some of the reasons that has supported Brent crude oil’s recent surge to $70/b. Especially the risk of a new super-cycle and a looming shortfall was given a cold shoulder. Not only do they see ample oil inventories despite a steady decline from the massive overhang that piled up during 2Q20. The also highlighted the hefty amount of spare production capacity, currently in the region of 8 million barrels/day that is being held back by OPEC+ members.
With the recovery in fuel demand still fragile, global demand look set to grow by 5.5 million barrels/day in 2021 according to averaged estimates from IEA, EIA and OPEC, and it will not return to pre pandemic demand levels before 2023. With these developments in mind it is clear that the 80% rally since early November, when the first vaccine news broke, has primarily been driven by OPEC+ withholding production.