MCX Crude Oil Tips for Today: Crude Oil yesterday settled down by 0.09% at 4434 as investors weighed rising supplies from major producers and the impact on fuel demand from the COVID-19 pandemic.
MCX Crude Oil Tips for Today Hit Watch High 4569
The Organization of the Petroleum Exporting Countries (OPEC) and its allies, a group known as OPEC+ that includes Russia, agreed to gradually increase supplies by 2 million barrels per day between May and July.
Concerns are surfacing that renewed lockdowns in parts of the world to curb rising COVID-19 cases and problems with vaccinations could alter the oil demand picture.
The forecast for global oil demand outlook has shifted lower amid renewed lockdowns in parts of the world to curb rising Covid-19 cases and problems with vaccinations.Russia expects the fallout from the COVID-19 pandemic on the global consumption of oil and oil products may last until 2023-2024.
World oil and liquid fuels production fell in 2020 to 94.25 million barrels per day (bpd) from 100.61 million bpd in 2019, amid the pandemic, which led to lockdowns, halting 80% of air traffic and a quarter of road traffic at its peak and denting fuel consumption.
The Organization of the Petroleum Exporting Countries expects oil demand to grow by 5.6 million barrels per day this year under its base case scenario. Russian Deputy Energy Minister Alexander Novak has also projected similar growth.
How to Trade the Free MCX Crude Oil Tips
- MCX Crude Oil trading Zone 4350—4770.
- Crude Oil gained on optimism over a rebound in the U.S. economy as coronavirus vaccinations accelerated and on tensions in the Middle East.
- Iran raises May crude oil official selling prices for Asia.
- Saudi Arabia meets May crude supply for most Asian buyers.
Energy security concerns are bubbling beneath the surface. While OPEC+ can provide the necessary crude as demand recovers in the near term, there may be a lack of firepower from the rest of the oil producing fraternity further down the line. The recent rise in oil prices could be just what the world needs.
The global physical oil benchmark Dated Brent is hovering in the low $60s/barrel, having risen more than 50 per cent since demand-led optimism over the Covid-19 vaccine rollout back in November. And oil prices could shift higher again once the market shakes off the latest bout of coronavirus jitters.
S&P Global Platts Analytics predicts oil prices will climb above $70/barrel around mid-2021, as improved supply and demand fundamentals starting from May lead to substantial stock draws through to August.
While large oil consuming countries such as India may crank up the volume over their displeasure and many OPEC+ countries may be eager to ditch compliance to their production-cut deal or push to pump more, both consumers and producers alike may want to consider the benefits should oil prices stay in their arguable sweet spot.
While the warning signs over a supply crunch in the coming years are well documented, they have been overshadowed by the pressing needs of consumer economies ravaged by Covid and producer countries crippled by low oil prices. But these very low oil prices along with the energy transition push have accelerated supply concerns.
Many analysts have tried to put huge numbers on the likely shortfall in spending on upstream oil projects in the coming years, signaling that even with higher prices driving investment in new projects, there is a long way to go before this spending starts to plug the gap.
Saying that, there is a strong correlation between the average oil price and sanctioned non-OPEC oil projects in recent years. Indeed, there is already evidence of a pick-up in approved oil investments, with some deferred projects in 2020 getting their due.
US oil production, noted over recent years for its stellar shale growth and ability to bring on crude at short notice, is unlikely to return to its pre-Covid peak of 13 million b/d until the middle of the decade, according to Platts Analytics.
But there are glimmers of hope. While many US oil companies are still in a precarious financial position, low well breakevens and positive cash flow this year are stimulating shale output at current prices.
“Sustained oil prices above $60/b could allow oil companies to respect the pledges that they made in their latest investor strategies to maintain capital discipline, return capital to investors, reducing their debt but at the same time increasing their investment,” the International Energy Agency’s head of oil markets division Toril Bosoni said in a recent interview with Platts.
In the meantime, as OPEC+ starts to raise output to meet growing oil demand, the amount of spare capacity in the system begins to dwindle. Platts Analytics sees the amount of crude that can be sustainably produced at short notice halving by September to less than 4 million barrels per day (b/d), with most of that left in the hands of Saudi Arabia.
While global spare capacity has over the past decade averaged close to 2 million b/d, according to Platts Analytics calculations, attacks on Saudi Arabia oil facilities – which appear to have become a more frequent occurrence of late – become a bigger risk factor when oil buffers are reduced.
OPEC+ may finally take a bigger share of the market given weaker competition and increased demand, but an overreliance on the oil producing pact with less spare capacity has its own risks.
Middle East geopolitics are notoriously unpredictable, with recent history marked by Iran sanctions, Libya’s internal political dispute, disruptions at pivotal waterways, such as the Strait of Hormuz and Bab el-Mandeb, and the attack on Saudi Arabia’s Abqaiq oil infrastructure.
While the container ship that got stuck in the Suez Canal rattled supply chains more than oil markets, it should serve as a reminder of how vulnerable chokepoints are for tankers to deliver crude and key oil products – especially when oil balances are thinner.
Energy security comes at a price for both the consumer and the producer, as the former looks to diversify crude streams and the latter tries to ensure better returns. Guaranteed stable supply matched with regular demand is in the interest of all parties. Getting this wrong could prove costly. (With Agency Inputs)