Spike In Oil Prices Likely To Be Temporary As Market Eyes New US Supplies
Short-term supply disruptions have pushed Brent oil back above the key USD110.00 pb level.
A plethora of bearish factors, however, remain in place.
The US’s commitment to bringing on new supply looks like it is already in progress.
New crude oil supply disruptions from Libya’s Sharara and El Feel oil fields and the possibility of more to come have added to concerns over supply from Russia this month in an already tight market, helping to push Brent oil back above the key USD110.00 per barrel (pb) resistance level. This is despite the plethora of bearish factors that conspired to bring Brent back down through the key USD100.00 pb support level only a week or so ago. This latest price spike is unlikely to last for long, however.
Not only are all the bearish factors that pushed oil back down still in place, albeit with less clarity on the timing of a new ‘nuclear deal’ being struck between the US and Iran, but it appears that the comments made out of Washington about new supply coming into the market may occur sooner rather than later.
US Commitment To Huge New Crude Supplies
In comments made at the end of March, US Energy Secretary Jennifer Granholm stated very clearly that the government of President Joe Biden is confident that US oil and gas producers have already started taking steps that should result in a “significant increase” in domestic energy supply by the end of the year.
She added that the US is working to identify at least 3 million barrels per day (bpd) of new global oil supply, with assurances from several high-level oil and gas executives that their companies are set to dramatically increase investments, and bring online new rigs. According to the US’s Energy Information Administration (EIA), the US’s oil supply was estimated at 11.7 million bpd in March.
April’s EIA US Shale Report Shows 132,000 Bpd Extra Volume For May
In this same vein, the latest ‘Drilling Productivity Report’ (DPR) from the EIA for April shows that the seven major US shale oil basins – Anadarko, Appalachia, Bakken, Eagle Ford, Haynesville, Niobrara, and Permian – will see their collective crude oil production rise from 8,517,000 bpd in April to 8,649,000 bpd in May, an increase of 132,000 bpd. In addition, the number of ‘Drilled but Uncompleted’ (DUC) wells across the seven major sites fell by 114 from February to March of this year, indicating a consolidated move to bring more oil into the market.
This article was originally posted on FX Empire
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