Oil Market Takes a Breather
March 22, 2021
With oil prices falling by 7% on Thursday of last week, officials from several nation in OPEC saw proof that their caution in increasing output was justified. Analyst said it may reinforce Saudi Arabia’s cautious approach heading into the April meeting in two weeks.
Baker Hughes reported that oil rigs were up 9 to a total of 318 oil rigs. The number of rigs looking for oil is down 346 from one year ago. The number of active rigs has increased by 85% or 146 rigs since the cyclical low in Mid-August.
WTI crude oil and ULSD did trade higher on Friday to recover some of Thursday losses. RBOB futures struggled to get into positive territory. Reports of more drone attacks in Saudi Arabia offered some support for the rebound. Yemen’s Iran-aligned Houthi group on Friday said it hit a Saudi Aramco facility in Riyadh, in an attack comprising six armed drones. Saudi Arabia’s Energy Ministry said the air attack on its 140,000 bpd oil refinery caused a fire that was brought under control. The attack did not result in injuries or deaths and did not disrupt the supply of oil or oil derivatives.
Goldman Sachs see the oil price pullback as a buying opportunity and forecast Brent crude oil will reach $80 per barrel this summer even as the recent rally in prices “takes a big breather.” Despite the sharp drop in prices, Goldman expects rapid oil market rebalancing in the coming months. It said headwinds related to European Union demand and Iran supply would slow the oil market rebalancing by 750,000 bpd in the second quarter, although it expects OPEC+ will act to offset that. The bank sees OPEC+ production increasing by 2.8 million bpd by August, well above the ramp-up in production expected by OPEC and the International Energy Agency. The bank expects a significant increase in global oil demand in the coming months, comforted by demand indicators in areas of high COVID-19 vaccinations, with its Brent forecast rising from $65 per barrel in March to $80 per barrel this summer. The bank said the faster pace of vaccinations in the US and greater fiscal spending created upside risks to its demand estimates.