Oil prices have reached a new level over the last few months, with Brent briefly touching US$80/bbl in May, but the last month has seen prices moderately lower, generally in the mid-to-high 70s range, points out the analysis team at NAB.
Key Quotes
“WTI has traded at a substantial discount, although this has evaporated over the last week amid unchanged US production but large inventory drawdowns.”
“A key driver of the rise in prices has been the OPEC-Russia deal to cut oil output, compounded by collapsing Venezuelan production and the US decision to end the Iran deal.”
“While Saudi Arabia – OPEC’s biggest oil producer at around 8-10 million bbl/day – has now been signalling for some time that it will likely make more oil available, the forthcoming float of state-owned Saudi Aramco is likely to remain a high priority.”
“Another major consideration is the extent to which US shale production will respond to higher prices. Overall we still expect US shale to expand with prices around these levels, although it is fair to suggest that the pace of expansion has been slower than we expected.”
“Our forecasts point to Brent spending the next few months largely in the mid-to-high 70s range, although meaningful OPEC-Russia output increases could push prices lower later in the year and higher US shale production should impose an upside limit on WTI.”
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