Friday, June 23, 2023

Rystad: "Why Aren't Oil Prices Higher?"

From RigZone, June 20:

Why aren’t oil prices higher despite the expected market tightening?

That’s the question Rystad Energy Senior Vice President Jorge Leon outlined in a new market update, which was sent to Rigzone on Monday.

“Despite expectations of a looming oil market deficit, prices have remained surprisingly low,” Leon stated in the update.  

“According to Rystad Energy, the oil market is projected to face a significant deficit, averaging 2.4 million barrels per day for the remainder of the year,” he added.

Looking at reasons for the phenomenon in the update, Leon noted that Rystad Energy suggests a combination of non-fundamental factors, lagging demand, and stronger than expected supply are at play.

Despite the price trend however, Leon said in the update that Rystad believes that, at some point in the coming weeks, market fundamentals will drive the oil market.

“Upside price pressure will materialize soon,” Leon stated in the update.

The Rystad representative conceded in the update that downside risks include a potential failure to stimulate the Chinese economy and lower than expected discipline by OPEC+ in adhering to production cuts. However, Leon stated that, “despite these risks, we remain confident that significant upside price pressure will materialize in the second half of the year”.