OPEC+ supply increase unlikely

On Wednesday, U.S. President Joe Biden’s administration requested the Organization of Petroleum Exporting Countries (OPEC) and its partners, identified as OPEC+, to increase production to stop rising gasoline prices that they perceive as a threat to the global economic improvement.

In a note dated Thursday, Goldman Sachs said they don’t comprehend the new White House statement as endangering the current market shortage or the pace of the rebalancing in 2H21, keeping their year-end Brent estimate at $80 per barrel.

On Friday, Brent futures slid 0.4% to $71 a barrel while U.S. West Texas Intermediate crude traded about $68.76. [O/R]

Nevertheless, Goldman wrote an additional hike in OPEC+ output by the year-end is expected to counter new supply failures globally and assumes OPEC+ spare capacity to be entirely normalized by spring 2022.

Last month, OPEC+ was granted to increase oil supply from August to reduce prices that have risen to 2-1/2 year highs.

The U.S. bank lately reduced its oil demand outlook for China, quoting growing worries over the spread of the Delta variant.

The bank said that the Delta menace to oil demand has previously softened the global balance in the short term, with the deficit narrowing from 2.3 to 1.0 million barrels per day.

Looking past the Delta headwind, they assume the demand improvement to proceed alongside increasing vaccination rates.

EIA flags below average

The U.S. Energy Information Administration (EIA) announced a high level of natural gas exports this year, linked with relatively low output, which has led to a below-average fuel injection into storage going into the winter heating season.

Inventories of gas managed to warm houses and companies have just risen by 960 billion cubic feet (bcf) so far this injection season within April 1 and October 31, which is 14% weaker than the five-year average stock build through the April-July period, the EIA stated in a release here.

In its August 2021 Short-Term Energy Outlook, the EIA estimate inventories touched 3,592 bcf by November 1, 159 bcf under the prior five-year (2016–2020) average.