![]() ![]() Many investment banks have recently warned against an oil price supercycle in 2021, yet as OPEC+ continues to hold around 7 million bpd off the markets, we think it is still early to predict such supercycles. The US dollar index is also at record lows, mainly due to rising inflation prospects, and bond yields which reduce the appetite for investors in investing in bonds and shift investors' interests in physical assets like commodities. Prices of copper for instance rose by 10.6% since President Biden took office which gives a clear indication of rising demand for this metal to achieve energy transition targets.įurthermore, the Texas freeze added to the list of bullish factors, as almost 4 million bpd of crude oil output came offline, marking the worst energy crisis in the history of the state. ![]() Such policies have raised questions about ensuring sufficient investment in new oil production and raises concerns about the security of supply in the next few years as the world recovers from the COVID-19 pandemic. Since the Biden administration took office this year, we have seen major decisions supporting the climate agenda including the suspension of fracking on US Federal lands, the cancellation of the Keystone XL pipeline between Canada and the US, and the full return of the US to the Paris climate agreement. The current strategy of the US shale industry is to focus on stable returns to shareholders rather than supply growth which reduces the likelihood of production increases despite increasing prices. Other factors include a slowdown in US oil production, with the number of oil rigs in the US remaining at least 50% below its 2019 levels at 309 rigs, indicating a potential flat production for 2021. The major drivers behind this rally include the rise in vaccination rates and the 1 million bpd new year surprise cut from Saudi Arabia, in addition to continued high compliance from OPEC+. After breaking the $50 barrier last year, oil prices are currently trading above $60. ![]()
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