Released January 05, 2022 | SUGAR LAND
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Written by Daniel Graeber for Industrial Info Resources (Sugar Land, Texas)--Even the casual observer to commodity news expected the Organization of the Petroleum Exporting Countries (OPEC) to rubber-stamp its production guidance for February--though it may be something of an indication of future market direction, despite the lack of fireworks.
OPEC members, along with a handful of non-member states, are coordinated as a group dubbed OPEC+ to adjust production policy in an effort to stabilize crude oil markets. The group spent much of the latter half of 2021 fending off calls to add more barrels to the market than already planned, in an effort to control runaway crude oil prices.
While off late-2021 peaks, West Texas Intermediate, the U.S. benchmark for the price of oil, is still at multi-year highs. And while inflation in general is a looming concern, the increase in prices for consumer goods pales in comparison to the exponential rise in commodity prices.
According to the federal government, the cost for all consumer prices rose about 6% during the 12-month period ending in November. For energy commodities, inflation is running at a staggering 57.5%.
Yet OPEC at its regular meeting on Tuesday held to the regular plan to add another 400,000 barrels per day of crude oil to the market, starting in February. Reaffirm, reconfirm and reiterate were the main themes in the post-meeting press statement. Nothing seemed too terribly pressing for the producer group.
With oil prices still holding at multi-year highs against the backdrop of prolonged pandemic-related strains on the economy, OPEC+ may have cause to celebrate. Even with the announcement of more oil coming to the market, crude oil prices continued to rise through much of the Tuesday session.
And yet, OPEC in its monthly market report for December lowered its forecast for global economic growth in 2021 and stood firm to its expectation that global GDP would increase by 4.2% this year, a full percentage point lower than last year.
All told, that leaves the market facing the potential for a surplus. A research note from London oil broker PVM found that additional oil on the market, no matter from where, is pointing to a coming glut that would--despite today's rally--keep a lid on runaway market prices.
"We are still of the view that the war against the pandemic will end in an obvious victory, which will be the catalyst for higher stock equity and oil prices," PVM analyst Tamas Varga wrote. "Nonetheless, the resumption of the move higher is only expected after a few months of static-to-slightly-lower price levels."
Geoffrey S. Lakings, the chief strategist at IIR Energy, noted the war against the pandemic could end "in an unorthodox fashion, as we know not yet the repercussions of long COVID. Omicron could be inoculating the world, when the world governments would themselves not step up."
"And though U.S. automotive traffic is likely depressed still somewhat from a holiday weekend start to the year, one cannot forget how much air traffic itself has been curtailed as thousands upon thousands of flights have been canceled in the U.S. and worldwide," Lakings said. "That being said, a majority of the pundits say this impact to hydrocarbon demand will be short-lived. Also, though OPEC+ is looking to bring more supply to market, the greater story is if can they (increase supply) as there have been rumblings out of Russia and elsewhere that they 'are tapped.' And one cannot forget Libya has supply off the market because of their geopolitical tensions, likely the precursor to yet another civil war."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
OPEC members, along with a handful of non-member states, are coordinated as a group dubbed OPEC+ to adjust production policy in an effort to stabilize crude oil markets. The group spent much of the latter half of 2021 fending off calls to add more barrels to the market than already planned, in an effort to control runaway crude oil prices.
While off late-2021 peaks, West Texas Intermediate, the U.S. benchmark for the price of oil, is still at multi-year highs. And while inflation in general is a looming concern, the increase in prices for consumer goods pales in comparison to the exponential rise in commodity prices.
According to the federal government, the cost for all consumer prices rose about 6% during the 12-month period ending in November. For energy commodities, inflation is running at a staggering 57.5%.
Yet OPEC at its regular meeting on Tuesday held to the regular plan to add another 400,000 barrels per day of crude oil to the market, starting in February. Reaffirm, reconfirm and reiterate were the main themes in the post-meeting press statement. Nothing seemed too terribly pressing for the producer group.
With oil prices still holding at multi-year highs against the backdrop of prolonged pandemic-related strains on the economy, OPEC+ may have cause to celebrate. Even with the announcement of more oil coming to the market, crude oil prices continued to rise through much of the Tuesday session.
And yet, OPEC in its monthly market report for December lowered its forecast for global economic growth in 2021 and stood firm to its expectation that global GDP would increase by 4.2% this year, a full percentage point lower than last year.
All told, that leaves the market facing the potential for a surplus. A research note from London oil broker PVM found that additional oil on the market, no matter from where, is pointing to a coming glut that would--despite today's rally--keep a lid on runaway market prices.
"We are still of the view that the war against the pandemic will end in an obvious victory, which will be the catalyst for higher stock equity and oil prices," PVM analyst Tamas Varga wrote. "Nonetheless, the resumption of the move higher is only expected after a few months of static-to-slightly-lower price levels."
Geoffrey S. Lakings, the chief strategist at IIR Energy, noted the war against the pandemic could end "in an unorthodox fashion, as we know not yet the repercussions of long COVID. Omicron could be inoculating the world, when the world governments would themselves not step up."
"And though U.S. automotive traffic is likely depressed still somewhat from a holiday weekend start to the year, one cannot forget how much air traffic itself has been curtailed as thousands upon thousands of flights have been canceled in the U.S. and worldwide," Lakings said. "That being said, a majority of the pundits say this impact to hydrocarbon demand will be short-lived. Also, though OPEC+ is looking to bring more supply to market, the greater story is if can they (increase supply) as there have been rumblings out of Russia and elsewhere that they 'are tapped.' And one cannot forget Libya has supply off the market because of their geopolitical tensions, likely the precursor to yet another civil war."
Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn.
