Energy Report: $70.00 Again

The price of crude oil briefly touched $70.00 a barrel again for the first time since 2018 as the re-open trade increased demand. OPEC dominates the global oil market while the U.S. rig count failed to respond to higher prices. China saw a slight dip in imports, but other nations saw an increase, continuing the trend of increasing demand and falling global inventories. Yet the resumption of the Iranian nuclear talks and concern that a roadmap to a global corporate tax will hurt growth, is slowing the impressive rise in the crude oil market.

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Let’s look at rig counts. In the past when the oil process rose, rig counts would increase rapidly rising U.S. production. That is not happening this time. Reuters reported that the oil rig count was unchanged last week at 359, up from a cyclical low of 172 in Aug, but down from 683 before the arrival of the first wave of the coronavirus epidemic. Shale producers are either showing incredible restraint or they can’t get funding. Banks are turning their back on U.S. energy giving rise to a new era of OPEC dominance.

The Energy Report has argued that Biden’s climate agenda would ultimately make us more dependent on foreign oil and make “OPEC GREAT AGAIN”. Now the world’s largest oil trader agrees. Bloomberg News reports that OPEC+ appears in control of crude prices as U.S. production is lagging pre-pandemic levels, according to a senior executive at the world’s biggest independent oil trader, Vitol Group.

The decline in U.S. drilling and output leaves little competition to efforts by the producers’ group to manage markets, Mike Muller, Vitol’s head of Asia, said during an online conference on Sunday. Brent crude closed above $70 a barrel last week for the first time in two years, as buyers demand more oil than producers are pumping. U.S. oil producers are still employing only half the rigs they used before the coronavirus struck. Meanwhile, OPEC+, as the group led by Saudi Arabia and Russia is known, is easing barrels back onto the market as demand recovers. “There’s a perception in the market that control is with OPEC+,” Muller said at the event hosted by the consultancy Gulf Intelligence. “It will take a long time for U.S. oil to come back” to production levels seen before the coronavirus outbreak, he said. 

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