Russian and U.S. Diplomats Set to Discuss Ukraine Tensions
February 1, 2022
Russia’s Foreign Minister Sergei Lavrov and US Secretary of State Anthony Blinken will speak by phone today, Tuesday, as diplomatic efforts continue to reduce tensions over Ukraine.
According to the EIA, US crude oil production increased over 2% to 11.75 million BPD in November as shale drillers continued post-pandemic recovery. The EIA also reported that US total oil demand in November increased by 9.9% or 1.852 million BPD to 20.595 million BPD. US gasoline demand in November increased by 12.3% or 988,000 BPD to 8.989 million BPD, while distillate demand increased by 7.6% or 295,000 BPD to 4.174 million BPD. The EIA also reported that imports of Saudi crude increased to 509,000 BPD in November, the largest volume since July 2020.
According to Reuters, OPEC’s output in January totaled 28.01 million BPD, up 210,000 BPD on the month but short of the 254,000 BPD increase allowed under the OPEC+ supply deal. The OPEC+ agreement allowed for a 400,000 BPD production increase in January for all members, of which about 254,000 BPD is shared by the ten OPEC members participating in the deal. OPEC’s compliance with its pledged cuts increased to 132% in January, up 127% in December. The most significant increase in output came from Saudi Arabia, which increased its production essentially as promised.
Bloomberg oil strategist, Julian Lee, said OPEC+ output was about 740,000 BPD below target in December, and the gap is likely to widen again in January and probably in February. He said many OPEC+ countries had experienced a decline in investments needed to maintain production capacity. As a result, most would not reach pre-pandemic production levels even if all restrictions were removed. He said OPEC+ producers are expected to add another 400,000 BPD to supplies in March.
These concerns about OPEC+ output, the current low inventory levels, and the tension between Russia and Ukraine have pushed the energy markets to a price level the market has not seen in 7 years. January saw WTI crude oil and Brent crude oil rallies over 17%. Oil futures have seen their largest rally in January in 30 years. How much of the fear and geo-political risk premium is in this market with this strong rally?