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Crude: Super Cycle or So-so Cycle?

 In Newsletter

Issue 152

Assets Covered: ICE Brent Crude Oil Futures, NYMEX WTI Crude Oil Futures

 

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Crude markets are a long way from last year’s lows. April 20, 2020 was the day that WTI hit -$37 in the US. It’s hard to do worse than negative pricing of a physical commodity, but markets will undoubtedly find a way sometime in the future.

 

While awaiting the next circus act in financial markets, crude prices have recovered nicely. This week, Brent is trading in the mid-$60s and WTI is in the low-$60s. Crude’s rise has as much to do with the OPEC+ agreement as it does the global move to recover from Covid-19 (vaccines, reopening, etc). The OPEC+ originally cut 9.7 million barrels from daily production in April 2020 and is now around 6 million.

 

Our recent Quick Hit discussion with Vandana Hari, founder of Vanda Insights and veteran observer of energy markets, covered crude oil’s recent activity and likely trajectory amid Covid openings and Middle East tensions.

 

The real take-away is that crude oil is unlikely to follow the path of rapidly rising commodity prices. Global crude oil demand is still 5 million barrels per day below pre-Covid “normal”. With millions of barrels of capacity kept on the side lines, oil producing countries will be more than ready and able to provide additional supply at current prices when needed.

 

So, what’s the expectation for crude prices as Northern Hemisphere summer approaches? There is plenty of spare capacity, even with an aggressive re-opening in Europe and Asia, so crude prices should be pretty moderate through the summer. See our Complete Intelligence forecasts for ICE Brent and Nymex WTI below.

 

The longer-term outlook is a different question, so don’t forget to watch Part 1 of our discussion with Vandana Hari here.

 

NYMEX WTI Crude Oil Futures (CL1) – Forecasts until August 2021
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ICE Brent Crude Oil Futures (B10) – Forecasts until August 2021
CI Futures generated this chart. Book a demo to see it live in action.
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