Look For Continued Pacing Towards $100 Oil
(The views and opinions expressed in this article are those of the attributed sources and do not necessarily reflect the position of Rigzone or the author)
In this week’s preview of what to watch in oil and gas markets, Rigzone’s regular energy prognosticators look at increasing energy prices, U.S. supply trends, COP26 fallout and more. Read on below to find out the specifics.
Rigzone: What developments/trends will you be on the lookout for this week?
John Stilwell, Principal-in-Charge, Energy – Power and Utilities, Grant Thornton: Based on continued tightness in supply, economic recovery in key areas and regions and the external pressures on the marketplace, look for continued pacing towards $100 oil. Major investment banks are already predicting $100 oil, especially considering the continued recovery of global travel and potential for a colder than usual winter trend. Goldman Sachs says $90 oil could be a conservative outlook. We continue to monitor how inflationary pressures impact consumer spending, potentially slowing global economic growth and recovery.
Tom Seng, Director – School of Energy Economics, Policy and Commerce, University of Tulsa’s Collins College of Business: Higher energy prices are going to continue to fuel inflation in the near-term which will weaken the U.S. dollar. That will, in turn, support higher oil prices as foreign currencies re-enter the market. We will also have to start watching heating oil demand as colder weather occurs. This distillate inventory levels are five percent below the five-year average for this time of year.
Samuel Indyk, Senior Analyst at uk.investing.com: Following the latest OPEC decision, I’ll be keeping an eye on the White House for signs that a release from the Strategic Petroleum Reserve (SPR) could occur in the near-term. With OPEC+ maintaining their path, the U.S. may decide to release reserves to bring prices down. Biden’s popularity is waning amid high gasoline prices and elevated inflation so a release from the SPR to lower prices could improve his favorability ratings.
Jon Donnel, Managing Director, B. Riley Advisory Services: On the supply side, U.S. producers remain committed to capital discipline as the most recent updates to spending plans suggest that the bulk of the anticipated 20 percent plus year-over-year increases will simply be a function of current activity levels and service cost inflation rates, rather than a concerted attempt to drive production growth. The current EIA forecasts show U.S. production at about 12 million barrels per day at the end of 2022, up only about half a million barrels per day from current output. OPEC+ has been steadfast in its relatively modest monthly supply adds and there are increasing reports that certain members are struggling to raise production as spare capacity has been tapped. As a result, demand drivers are most likely to influence crude prices as we move forward over the next few months. Demand could be negatively impacted by continued elevated inflation rates, supply chain disruptions, or Covid spikes. However, worldwide demand is back near pre-Covid levels and if the recent positive trends continue, crude prices should remain high.
Tom McNulty, Houston-based Principal and Energy Practice Leader with Valuescope, Inc: The COP 26 fallout includes the default setting for governments: tax stuff you don’t like. Taxing natural gas is a bad idea because natural gas will be critical for any element of the energy transition to proceed efficiently.
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