US OIL PRICES TIED TO TWO GIANTS: OPEC+, COVID-19

Paul Wiseman looks at what’s driving the latest trends As with any commodity, oil prices are ruled by two sides of the coin – supply and demand. Energy experts agree that production decisions by OPEC+ are the most important supply side influences, while COVID-19 and concerns about possible variant-induced shutdowns heavily influence demand. In its August Short Term Energy Outlook, the US Energy Information Administration (EIA) estimated OPEC+ production would average 33.0 million bpd for the second half of 2021. The most recent OPEC+ agreement called for production to rise each month by 400,000 bpd until previous cuts are fully reversed. At that rate, full production would return by Q3 2022. It also estimates worldwide production at 98.9 million bpd – a level which has proved healthy for West Texas Intermediate prices, holding them either side of US$70 (€59.60) per barrel for months. This worldwide level, attained largely by the oil cartel’s supply restraints, has slowly reduced US crude oil storage levels since US tanks were filled almost to overflowing in Q2 2020. That flood, caused by a combination of a worldwide demand drop from COVID shutdowns combined with a...