The tightening crude supply situation could ease in the second half of this year and push Opec+ to return to the drawing board for further production cuts in 2023, delegates heard today at the Argus Oil Markets Forum in London.
Argus' chief economist David Fyfe told delegates that an easing of supply bottlenecks could push prices back to the $75/bl to $80/bl range. Output growth by non Opec+ producers presents the possibility of a re-emergence of a market surplus, with projects in countries such as Brazil and Canada that had previously been deferred adding around 3mn b/d of supply and a new phase of US shale production underway, said Fyfe.
The possible return of Iranian crude to the global market is also a factor although any return, of up to 1.4mn b/d, will not be immediate. Should sanctions against Iran be lifted a verification period will be required, delegates heard. Buyers will need to acquire the necessary insurance to be able to procure Iranian crude.
On the demand side, the momentum of economic growth could slow. High crude prices and a strong US dollar are likely to weigh on import demand from emerging markets. Economic growth in China — the world's second largest oil consumer — by 4pc year on year in the fourth quarter of 2021 to its weakest since 1990 outside of the pandemic period, indicating the post-pandemic recovery has not been uniform globally.
The current rise in crude prices are not only down to geopolitics but also because crude supply capacity has not increased at a similar pace to rebounding demand, Fyfe said.
Rising demand and tight supply has pushed prices to multi-year highs, with the North Sea Dated benchmark rising above $100/bl last week.
