Crude oil got another boost last week. Brent rose $1.35/bbl last week to average $62.92/bbl driven in large part by geopolitical concerns. WTI saw an even larger boost increasing $2.26/bbl on geopolitical concerns as well as a bullish inventory report and comments from Federal Reserve Chair Jerome Powell. For the week ahead we expect Brent to average $64/bbl as prices benefit from an increase in geopolitical risk as well expectations for a renewal of the OPEC+ supply agreement.
Tensions continue to ratchet up in the Middle East with reports late last week that Iran had downed a US drone that entered its airspace. With more troops entering the region and both countries on high alert the chances of further confrontations are rising.
Against the backdrop of heightened geopolitical risk, two bullish items emerged from the United States. First, the Energy Information Administration reported a draw in crude and refined products, a positive for demand. Additionally, Federal Reserve Chair Jerome Powell announced that interest rate increases would be paused and that the Fed was considering cutting rates later in the year. While these are positive signs for demand, the overall picture remains lackluster and markets are extremely pessimistic about the pace of future demand growth given multiple ongoing trade disputes and widespread uncertainty.
Despite these headline bullish items, OPEC still faces markets that are only fitfully in balance, and persistently anemic prices. OPEC ministers will meet in little over a week to discuss the fate of the ongoing supply agreement. Stratas Advisors believes that the ministers will agree to maintain current production levels. While all countries will likely continue with their current quotas, we expect that Saudi Arabia will need to take on a larger share of the burden to compensate for cheating. The full extent of that burden will depend on the pace of declines and interruptions in several other members including Venezuela, Libya, and Iran.
Geopolitical Unrest – Positive
Global Economy - Neutral
Oil Supply – Positive
Oil Demand – Neutral
How We Did
Recommended Reading
NatGas Prices Drop After Freeport LNG Train Shutdown
2024-11-22 - Freeport LNG’s report says one of three liquefication trains went offline due to an oil lube pump issue on Nov. 20.
Darbonne: What are We Supposed to do Without Hydrocarbons?
2024-11-21 - Oil and Gas Investor asked individuals who understand fossil fuels if any “end oil” agitator has ever explained what the world would do without hydrocarbons. No, they haven’t gotten an answer either.
NatGas Storage Drops Ahead of Predictions
2024-11-21 - U.S. Energy Information Administration's weekly report shows the first withdrawal of the fall, a week before the consensus forecast.
US NatGas Prices Jump 7% to 1-Yr High on Surprise Storage Draw, Colder Forecasts
2024-11-21 - The U.S. Energy Information Administration said utilities pulled 3 Bcf of gas from storage during the week ended Nov. 15.
Permian Trends Continue to Point to Crude Growth
2024-11-20 - Smaller, more creative M&A deals are becoming the standard in the Permian’s Midland and Delaware basins, an Enverus analyst says.
Comments
Add new comment
This conversation is moderated according to Hart Energy community rules. Please read the rules before joining the discussion. If you’re experiencing any technical problems, please contact our customer care team.