The basics of Brent crude oil:
- OPEC will potentially lower below 2022 oil demand forecast on Monday
- The effects of Hurricane East oil prices remain modest
- China is auctioning off oil reserves to protect local refineries from rising commodity prices
In the light of delta risks, OPEC downgraded its demand for lower-than-expected oil demand
OPEC is likely to cut its forecast for global oil demand by 2022 in view of the growing challenges associated with the proliferation of the Delta option. OPEC, the International Energy Agency (IEA) and the Energy Information Agency (EIA) produced forecasts for the rest of 2021 and 2022, and OPEC is the most optimistic of both estimates.
source IEA, EIA, OPEC + sources
Earlier this week, OPEC decided in October to increase its production by 400,000 barrels per day (bpd), in line with its gradual plan to resume supply to international markets after a sharp cut-off at the start of the pandemic.
To meet OPEC’s 2021 oil demand growth forecast global demand must be average about 100 million bpd per year the last quarter of this year -Almost 1 million bpd higher than the IEA’s fourth quarter forecast.
The price effects of Hurricane IDA are modest
Recent EIA data suggest a less resilient recovery as US stocks were reduced by 1.529 million until 3 Septemberrd versus the expected figure of -4.612 million.
Understandably, weekly agricultural production fell to 10,500,000 from 11,500,000 during the period of Hurricane Eastern disruption.
Weekly US crude oil production
Oil prices were able to remain relatively subdued and traded largely over the week, despite recent developments.
It remains to be seen whether the review of OPEC next week, should it take place, will lead to a fall in oil prices or maintain the current sideline. At the end of the week, we will see oil prices, supported by the main 71.20 subsidy, but will struggle to form a rise above the resistance of the trend line. This may lead to continued consolidation in the absence of external drivers or shocks.
Daily schedule of crude oil
The chart was compiled by Richard Snow, IG
Chinese auctions of oil reserves
The Beijing Reserve Administration said on Tuesday that China is planning its first public auction of state-owned crude oil reserves for domestic refineries. The auctions take place in stages, trying to better stabilize domestic supply and demand, thus ensuring the country’s energy security.
While the reference price for Brent crude oil is about 40% higher this year, China’s international crude oil futures (ISCc1) have risen 50%. The details are scarce as no mention was made of the volume or timing of the auctions.
China’s international crude oil futures (ISCc1) over the past year
The chart was compiled by Richard Snow, Source: Refinitive
– Written by Richard Snow for DailyFX.com
Connect and follow Richard on Twitter: @RichardSnowFX