Oil Prices May Have Peaked For Now

Oil Prices May Have Peaked For Now

The oil market continues to surprise, with WTI apparently firmly above $60, a level that could be equated with the pre-pandemic norm (as norm as any oil price can be, which admittedly isn't very). Considering the global economy remains fragile with numerous areas still suffering badly from the pandemic, including Europe, source of 15% of world oil demand (in normal times), inventories remain adequate and spare crude production capacity is still near thirty year highs, such price levels might appear unjustified. Assuming this isn't just a financial stimulus driven asset bubble (which is certainly a factor), it would seem that markets are watching the combination of recovering demand (vaccine rollout) and falling inventories. In reality, the IEA has lowered it's expectations for the 'call-on-OPEC plus stocks' in recent months, largely reflecting the impact of covid19 surges in a number of countries. (Figure below) Call on OPEC plus stocks from various IEA Oil Market Reports (mb/d) Perhaps more important to traders, the IEA's latest Oil Market Report estimates that February OECD inventories fell by nearly 2 mb/d, one of the sharpest changes in years, as the figure below shows. Given the likely drop in March, especially due to the Saudi voluntary