International Demand

U.S. crude oil producers add rigs to meet future demand

U.S. West Texas Intermediate and international benchmark Brent crude oil futures were higher on Friday night after the International Energy Agency (IEA) said global oil markets were tight, but added that the Saudi Arabia and the United Arab Emirates could dampen oil market volatility. Meanwhile, US drillers continued to add rigs in an effort to increase production to meet future demand.

IEA Optimistic Outlook

The International Energy Agency (IEA) has raised its demand forecast for 2022 and expects global demand to rise by 3.2 million barrels per day (bpd) this year, reaching an all-time high of 100.6 bpd.

The IEA added that Saudi Arabia and the United Arab Emirates could help calm volatile oil markets if they pumped in more crude, adding that the OPEC+ alliance produced 900,000 bpd below target in January. .

The two OPEC producers have the most spare production capacity and could help relieve dwindling global oil inventories that have been among the factors pushing prices toward $100 a barrel, worsening inflation around the world.

The IEA said effective spare capacity could fall to 2.5 million barrels per day (bpd) by the end of the year, owned almost entirely by Saudi Arabia and, to a lesser extent, by the United Arab Emirates.

“These risks, which have broad economic implications, could be reduced if Middle Eastern producers with spare capacity compensate those that are running out,” the Paris-based agency said in its monthly oil report.

OPEC sees additional demand to predict strong pandemic recovery

OPEC said on Thursday that global oil demand could rise even more strongly this year as the global economy shows a strong recovery from the pandemic, a development that would support prices already at a seven-year high, Reuters reported. .

Tighter oil supplies also provided a boost to booming energy markets, and the report from the Organization of the Petroleum Exporting Countries also showed that the group had underestimated an increase in oil production promised in January as part of its pact with its allies.

In the report, OPEC said it expected global oil demand to rise by 4.15 million barrels per day (bpd) this year, unchanged from its forecast last month, after a sharp increase of 5.7 million bpd in 2021.

US drillers add most oil rigs in a week since February 2018 – Baker Hughes

U.S. energy companies this week added the most oil rigs in four years, with crude prices hovering near their highest level since 2014, prompting drillers to seek more profits, Reuters reported.

The number of oil and gas rigs, an early indicator of future production, rose by 22 in the week to February 11, in its biggest increase since February 2018. At 635, the number was now at its lowest. highest since April 2020, energy services company Baker Hughes Co said in its closely-watched report on Friday.

Baker Hughes said the total number of platforms increased by 238, or 60%, compared to the same period last year.

U.S. oil rigs rose 19 to 516 this week, their highest since April 2020, while gas rigs rose two to 118, their highest since January 2020.

Short-term outlook

With the IEA and OPEC predicting stronger demand, increased US production should be absorbed easily, so these traditional supply and demand fundamentals remain bullish.

The bearish wildcard is the US-Iran nuclear deal. The bullish wildcard is the Ukraine-Russia crisis.