Up and Down

This weekly report is an excerpt from our Short-Term Outlook service analysis, which covers a period of eight quarters and provides monthly forecasts for crude oil, natural gas, NGL, refined products, base petrochemicals and biofuels.  Contact John Paisie (+1-832-517-7544 or E-mail) for the detailed analysis or for more information about the Short Term Outlook.


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The price of Brent crude ended the week at $91.63 after closing the previous week at $97.92. The price of WTI ended the week at $85.61 after closing the previous week at $92.64.

In our previous note published at the beginning of last week, we put forth the view that the market overreacted to the recent announced production cut from OPEC+ for several reasons:

  • The actual supply reduction will be significantly less than the announced cut because many members of OPEC+ have been struggling to meet production targets
  • Crude Inventory levels in the US are greater than for the same period during 2021, as well as the levels of 2019 and 2018
  • The US economy continues to show weakness – as are the economies of Europe and China – and the global economic growth is trending downward
  • While product inventories are relatively low, demand growth has been tepid and slowing down

Developments that occurred last week highlighted each of the above points:

  • The emerging consensus view is that the OPEC+ supply cut will be in the range of 1.0 million b/d – about half of the announced cut
  • Furthermore, it is worth noting  that Saudi Aramco seems to be planning to export full November contract volumes of crude oil to customers in North Asia
  • According to the latest weekly EIA report, US crude inventories increased by 9.88 million b/d – and in comparison, to the same period during 2021, crude inventories are greater by 12.11 million barrels, 13.51 million barrels above the level of 2019, and 29.13 million barrels more than in 2018
  • Recent statements from the IMF further emphasized the growing risk stemming from inflation, concerns about the supply of energy and food, and higher interest rates, and that the global economy is being pushed towards a recession with the possibility that the worst is yet to come
  • The research arm of OPEC reduced its forecast for oil demand growth in 2022 to 2.64 million b/d from its previous forecast of 3.10 million b/d (in comparison, since 2Q Stratas Advisors has been forecasting that global demand will increase by 2.20 million b/d during 2022)

With respect to the upcoming week, we are expecting that there will be more downward pressure on oil prices. For a complete forecast of energy prices, including crude oil and refined products, please refer to our Short-term Outlook.

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