Now that the Ever Given has been dislodged from the Suez Canal, the oil market can look forward to the OPEC+ meeting on Thursday and the outlook for possible resurgences of COVID-19 to determine future price direction.
Following a brutal year for their balance sheets, the world’s biggest oil companies are anticipating a windfall of cash flow this year. Prices have rallied significantly over the past month or so, and the massive cost-cutting from last year positions some of the biggest International Oil Companies (IOCs) to reap the benefits of high crude prices.
After 2020’s unpredicted decline in oil prices and subsequent response by OPEC+ to cut oil production as means to buoy oil prices, the world’s largest exporter Saudi Arabia, plans to reverse its position and increase its production in the coming months. This comes as WTI oil prices have traded to as low as negative $40/barrel back in April 2020, to currently trading at $60.42/barrel. Earlier this month OPEC+ leaders said they would cut production by one million barrels per day, with efforts to raise prices during the months of February and March.
We are a mere 7 days into a new year, and have already seen the first oil rally in the markets. Many factors have played a role in the first rally of the new year. Oil has been tumultuous over the last 11 months but has seen some stability and positivity since Biden’s election win in November. Biden was confirmed by the senate to be the 46th President of the United States of America and he will have a democratic controlled House and Senate to put his plans into action.
For the 2021 calendar year, there will be 5.8 million barrels per day crude production cuts. These cuts are an effort to balance the current oversupply due to COVID-19 with an estimated demand forecast for the year.
The oil complex is trading much higher this morning due to a flurry of bullish headlines: increased chances of a federal stimulus package, weaker dollar, oil strikes in Norway, and the development of Tropical Storm Delta.
The relationship between big oil and big corn has been tenuous at best for years, but with historic declines in fuel consumption due to COVID-19, the fight has reignited in a major way. Oil refiners and their allies from the Gulf Coast and Pennsylvania are in a serious policy battle with ethanol producers, corn farmers and Midwest politicians. At the heart of the disagreement is that the oil refining industry is seeking waivers from biofuel blending requirements resulting from the Renewable Fuel Standard (RFS).
Chevron and ExxonMobil highlighted an aggressive strategy for drilling in the Permian Basin over the next five years to their investors this week. Exxon is aiming to increase production to 1 million barrels per day while Chevron is targeting an additional 900,000 barrels per day, all by the end of 2024. The presentations from both companies exemplify a growing trend in the region that has made the United States the world’s top producer of oil and natural gas.
WTI oil prices rose Monday morning to $56.94/barrel due to a barrage of bullish headlines which puts this year’s oil rally north of 22% and climbing.