The crude oil market this week will look to data from the EIA to find support for a rally that pushed the international benchmark Brent crude close to $50 per barrel, analysts said.
Last week’s decision by OPEC+ to allow a modest 500,000 barrels per day increase output extended crude's rally, surprisingly enough. The market was cheered that consensus still holds in the cartel, even after the high-profile bristling between the United Arab Emirates and Saudi Arabia over whether to continue with the deal.
Tamas Varga, an analyst at London oil broker PVM, said the question is whether demand over the next year will be strong enough to absorb those additional barrels as vaccines for COVID-19 become available. He said forecasts of demand, production and prices from the U.S. Energy Department on Tuesday, OPEC on Dec. 14 and the International Energy Agency on December 15 could help clarify the outlook.
The U.S. Energy Department last month lowered its demand forecast by 400,000 barrels per day to 97.3 million barrels per day in the fourth quarter, citing the uncertainty about the COVID-19 pandemic. Vaccines close to release from Pfizer/BioNTech and Moderna could change the outlook on demand.
Oil prices might also get a lift as oil majors cut drilling budgets and curb production. Both Chevron and Exxon Mobil said last week they would lower capital spending. Chevron said its annual capital spending could fall as low as $14 billion through 2025, sharply less than its previous forecast of $22 billion.
RELATED: Chevron slashes capital budget through 2025
Saxo Bank estimated that oil majors are shaving a combined $80 billion from long-term capital spending plans, which the Danish investment bank said would likely lead to higher oil prices in 2022 and beyond.
Demand for petroleum products such as diesel also has helped drive commodity prices higher due to the surge in deliveries to shoppers buying online during during the pandemic. Last week, though, the Energy Department reported that inventories of distillate fuels, which include diesel, increased by 3.2 million barrels, suggesting demand was weakening.
Motor gasoline inventories, meanwhile, increased by 3.5 million barrels as more states issued lock-down orders given the rise in new cases of COVID-19.
Propane is another story. Matthew Kohlman, an associate editorial director for S&P Global Platts in Houston, said propane prices are rising despite the mild winter in the United States, in part because of higher demand in Asia.
“Propane export volumes were at 33-week highs might be even higher if they could find enough ships,” he said.
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December 07, 2020 at 09:15PM
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Demand signals to drive oil prices - Houston Chronicle
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