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Oil prices rose in the wake of the EIA’s latest report. While a WTI move to $60+/b is quite possible ($65 Brent), it may be short lived if OPEC+ signals their intention to increase production as strategists at TD Securities project.

Key quotes

“We expect range-bound trading until there is new information, likely in the form of OPEC+ signals, which will give the market an idea where supply is going for the balance of 2021.”

“Considering that WTI is approaching $60/ b and Brent is trading near $62/b, this producer group will no doubt want to phase in production increases, as demand recovers from the pandemic. We should see the Saudis reverse their voluntary one million b/d cut and Russia increase production as well. There is the risk that Iran will be able to export more should the Biden administration come to an agreement on the nuclear weapons issue.” 

“OPEC+ will want to generate deficits, but they will likely be smaller than in the first three months of 2021, as the producer group does not want the badly battered shale and other non-conventional producers to receive the higher prices which would once again make them serious competitors for market share. Ironically, the deployment of the shuttered OPEC+ capacity could see WTI and Brent crude prices slide $2-6 lower at the very time demand is starting to normalized after the COVID-19 pandemic.”