Stock Market Plunge Adds Pressure to Energy Market
May 6, 2022
Energy prices closed slightly higher in yesterday’s trading on the news that the European Union is working to finalize a plan to phase out imports of Russian oil and refined fuel products by the end of 2022. Questions still remain how the EU will get 27 members to agree since some countries are wanting more time to replace supplies. Russia can still replace this loss by selling oil to China and India.
Putting some selling pressure on price was the strong sell off in US equities due in part to the US dollar index near a 19-year high. A high US dollar puts selling pressure on oil prices.
OPEC+ agreed to stick to their plant to raise output in June by an additional 432,000 bpd. OPEC+ has collectively however, had a hard time producing to meet their output goals.
JP Morgan lowered its outlook for global oil demand for 2022 by 1 million BPD citing higher oil prices, a deteriorating growth outlook, and escalating geopolitical tension. It said, ”We now see total oil demand averaging 100 million BPD, 400,000 BPD below 2019 levels. “ JP Morgan maintained its Brent price forecast at $114 per barrel in the second quarter of this year and $104 per barrel for calendar 2022. It stated that oil prices are tight as weakness in global oil demand and release of strategic reserves, even outgrowing expectations that Europe may agree to curb oil purchases from Russia. The bank said, “With all these factors canceling each other out, we still expect a balanced market in 2022.”
Pioneer Natural Resources CEO, Scott Sheffield, said the U.S. forecast anticipating oil production to increase by 800,000 BPD to 1 million BPD this year is “too aggressive,” suggesting that oil prices could rise further. Pioneer expects to increase its oil output by at most 5% this year, from between 350,000 BPD to 365,000 BPD. He said labor and supply chain constraints would continue to hamper how quickly producers can increase oil and gas production.