The United States Energy Information Administration (EIA) stated in Short-Term Energy Outlook (STEO) published on Tuesday that it expects global crude prices to continue rising and international benchmark Brent to reach $86 per barrel in the second half of the year. The report noted oil prices are facing “upward pressure” due to “sustained global demand for petroleum products and Saudi Arabia’s extended voluntary production cuts.” The agency also noted it expects global oil production to increase by 1.4 million barrels per day (bpd) this year and added it sees non-OPEC output climbing by 2.1 million bpd, while OPEC production is expected to fall in 2023. Meanwhile, US crude production is seen reaching annual record levels of 12.8 million bpd in 2023 and 13.1 million bpd in 2024 as a result of “higher expected well-level productivity and higher crude oil prices.”
Crude Inventories To Sink To 8-Year Low This Year: Nuttall
Inventories of crude oil will reach an 8-year low by the end of this year, Eric Nuttal, partner and Senior Portfolio Manager at Ninepoint Partners, told BNN Bloomberg TV on Tuesday. While persistent fear of China’s stuttering crude oil demand and the boogeyman of high interest rates are periodically dragging down oil prices, the recent price rally in crude oil has been fairly substantial. “When you boil it all down, our measurement of the health of the oil market comes down to oil inventories—globally,” Nuttall explained. Using Kpler tracking data, “real time data as of this morning: global oil inventories are at an 8-month low. We expect between now and year end they will fall to an 8-year low due to strong demand still,” says Nuttal, who added that demand can be measured in real time. Nuttal also referenced last weeks’ biggest crude oil inventory draw in the history of the United States. “When we look between now and year end, there’s a strong fundamental support—we think at about $80 given where inventories are now—and we think we should strengthen as we go throughout the year.”
When speaking about recession fears, Nuttal pointed out that only twice in history has oil demand faltered—during Covid and during the Great Financial Crisis. All other recessions merely saw a slowdown in oil demand growth, not a dip in oil demand itself.
The IEA’s medium-term report released in June predicts that world oil demand is set to slow almost to a halt in the coming years on high prices and supply security issues push the world to fast-track their energy transition efforts. NN: It is settled business OPEC+, Russia and Saudi production cuts are shrinking oil inventories world wide. Now add to that record China demand and Sanction Limits on Russian Urals oil exports and you have a great big party.