WTI Crude Oil: trading forecast for the week of September 27 - October 3, 2021
Last week, the price of WTI oil soared to the level of $73.7 per barrel.
The market remains as positive as possible. Further growth in global oil consumption is expected in the next quarter. At the same time, an increase in production will most likely not be able to meet demand. This is largely due to the lag in production growth from the planned schedule in the OPEC+ countries, as well as the slow recovery of production in the Gulf of Mexico. According to the results of August, the execution of the transaction was 116% against 109% a month earlier. Thus, in the short term, there will be prerequisites for maintaining high oil prices.
Four weeks after Hurricane Ida hit Louisiana, oil production in the Gulf of Mexico is far from fully recovering. The US Bureau of Safety and Environmental Protection reported that as of the end of last week, 31 oil platforms were idle there, and the loss of production that day amounted to 294,414 barrels. The cumulative loss of production since Ida hit Louisiana reached 30.1 million barrels, making the hurricane the fourth most destructive in the last 16 years. According to the forecast, the full recovery of oil production in the Gulf of Mexico will take place only next year.
These data significantly shifted the market balance towards the deficit. Commercial oil reserves in the United States have reached the lowest level since 2018, and its reserves in Europe remain below the historical average for this time of year. All this led to a noticeable increase in oil prices this month, and on Friday, Brent quotes reached a record high for the last three years.
World oil prices may break new highs, including against the background of rising gas prices. According to some estimates, the demand for oil will grow by 500,000 barrels per day this winter. This may push the OPEC+ countries to increase the supply on the market. European gas storage facilities will be filled to 78% of the normal level by October, despite the fact that gas demand increases during the winter months. The decrease in the volume of gas contained in storage facilities coincided with an increase in demand from Pakistan, Bangladesh, India and China, seeking to use cleaner fuels. This means that gas will remain expensive in the short term. Buyers, in turn, will try to purchase alternative fuels for the energy sector or industrial needs, for example, liquefied petroleum gas.
Now the demand for oil is still 4 million barrels per day below the pre-crisis level of 2019, mainly due to a reduction in air traffic. However, this gap will be narrowing, and by the middle of 2022, demand will return to the level of 2019, and closer to 2030 it will reach a peak. The price of oil has continued to rise since the collapse in March 2020, when OPEC oil ministers could not agree on the parameters of an agreement to reduce production. Then the price of oil fell to $ 45 per barrel and after that even reached negative values. The growth began in May, after the members of the alliance signed an agreement to reduce production. In March, a year after the fall, the price of Brent exceeded the $ 70 mark for the first time since January 2020.
The forecast for the coming week assumes a corrective decline in the price of WTI oil to the levels of 73.4, 73 and 72.5 dollars per barrel.