EIA: Oil prices expected to continue to rise through April on lower output

Short-term oil price gains

In its March Short-Term Energy Outlook (STEO), the EIA reported it expects Brent crude will average $64 per barrel in Q2 2021. Then, it forecasts a fall to less than $60 per barrel through the end of 2022.
“Higher crude oil prices in March and April are primarily a result of lower crude oil production from members of the Organization of the Petroleum Exporting Countries (OPEC) and partner countries (OPEC+), as announced at their March 4 meeting.,” the EIA reported.
Last week, Stuart Burns weighed in on the oil price and its potential trajectory.
“Demand, however, remains subject to economic recovery,” he wrote. “The market would take any significant increase in output negatively, some analysts suggest. That could result in a sell-off.
“Recent price strength notwithstanding, the market still looks somewhat fragile. That condition no doubt explains the Saudis’ reluctance to increase output.
“Meanwhile, pressure will build with many producers at or around budgetary break-even at current levels.
“The next crunch point is the April OPEC meeting. The market is watching.”
On Tuesday, the OPEC daily basket price — a weighted average of 13 crudes — stood at $66.89 per barrel. The basket price opened the year at $59.60 per barrel. Meanwhile, the basket price had plunged as low as $17.66 per barrel in April 2020.

Inventory drawdown

As referenced yesterday in our report on housing starts, February proved to be a month of significant economic disruption.
That was also the case for oil supply.
“In February 2021, OPEC+ cuts, combined with supply disruptions in the United States, contributed to monthly global petroleum inventory withdrawals that EIA estimates totaled 3.7 million b/d, the largest monthly withdrawal since December 2002,” the EIA reported. “The Brent crude oil futures price averaged $63/b in early March leading up to the OPEC+ meeting, and the OPEC+ announcement put further upward pressure on crude oil prices.”
As readers of our Annual Outlook know — for which MetalMiner recently released its March update, available only to subscribers — oil prices are a key driver of MetalMiner’s analysis of commodities markets.
As such, oil prices are an important piece of the puzzle when considering metals markets.
Take copper, for example.
“Copper has taken much of its cue from oil prices, which remain at or around $65/barrel along with strong demand buoyed by the stimulus package just passed in the US House of Representatives,” Reisman said last week in the MetalMiner Copper MMI report for this month.
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