OPEC Meeting Sends A Shock Wave Into The Market

 Monday’s OPEC meeting sent a  shockwave into the oil market. The Organization of the Petroleum Exporting Countries (also known as OPEC) would stick to the originally planned 400,000 barrels a day increase, avoiding a larger production increase as people expected. This comes after supply concerns from the damage caused by Hurricane Ida in September and various power outages over the world.

Meanwhile, the stock market closed in red on Monday amid inflation concerns and possible US debt default. Western Texas Intermediate (WTI) crude price has surged above 7 years high, breaking the highest point in 2018, closing above $77.6 on Monday.

On Tuesday morning, Western Texas Intermediate (WTI) was up 1.86%, trading above $79 a barrel. Brent crude was up 1.93%, trading at $82.83, also the highest since 2014.

The bullish trend in crude prices will likely remain in the future as inventory worldwide has been trending lower since last year. The global oil market still faces a deficit this year for at least 1 million barrels per day according to the latest monthly reports and forecasts from OPEC and IEA reports. This is a huge contrast to the situation in 2018 when Brent crude surged above $80, but inventory reports a build of 1 million barrels per day for the full year.

And most importantly, the supply chain crises that emerge from the pandemic are likely to continue and become worse. Similar to last year, power outages are happening across Asia, Europe, and America. In September, global power outages and hurricane Ida have wiped out most of OPEC production increases over that month. European gas prices are exponentially higher comparing to last year, while in America, natural gas prices have surged up to 200% over the past 12 months to $6.15 per million British thermal units. Another extreme event this winter is likely to push the crude price towards $100 without additional OPEC intervention.

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