Energy Report: Righting The Ship

Oil prices have been on the move, dipping then flipping on headlines about the progress of reopening the Suez Canal, one of the world’s most important waterways. It was 6 days ago that the world's largest merchant ship, the Ever Given, got caught in a storm and it ended up getting wedged in sideways blocking the canal and effectively blocking 20% of the global supply chain. Reports that the ship had been refloated and partially freed caused a drop in oil but prices soon bounced back up as a larger reality sunk in. The truth is that oil and LNG and product supplies will be delayed and that will not help with a market that is on track to be undersupplied this summer as more COVID vaccinations inspire more demand.

The damage from the EverGiven mishap has already been done so now it is on to the upcoming OPEC Plus meeting getting to see if they are moved to increase production while all signs suggest that they will not. So the oil market that has recently seen some wild swings and a correction jeopardizing the bull run, should right the ship once OPEC plus meets.

Photo by samuel hanna on Unsplash

Reuters reports that “Russia would support broadly stable oil output by OPEC+ group of leading global oil producers in May while seeking a relatively small output hike for itself to meet the rising seasonal demand, a source familiar with Russia’s thinking said on Monday. Russian energy ministry and the office of Deputy Prime Minister Alexander Novak, in charge of Moscow’s ties with OPEC+, have not immediately responded to requests for comments. So this should suggest a rollover is in the cards. The excuse they will use is rising COVID cases but at the end of the day, it is all about making money and what they can get away with. OPEC Plus has no opposition from the Biden administration when it comes to cutting production. That silence will allow OPEC to increase the price of oil. That, in turn, is raising gasoline prices.

Now, the question is whether U.S. producers can increase production and ward off an oil price squeeze. Oil production in the U.S. did rise to 11 million barrels a day, still, 2 million barrels a day below the pre-pandemic peak. Yet there are some signs that shale producers might start to ramp up production but will it be too little too late to stop oil from surging to $80 a barrel.

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