Page 8 - Al-Rashed Newsletter November 2021

SHIPPING WORLD

Oil price spikes driven by ‘artificial tightness’, spare capacity
underutilised
Artificial tightness is a significant factor behind current tight oil pricing,
International Energy Agency chief Fatih Birol said, criticising the policy
stances taken by several key producers in failing to intercede more strongly
to calm markets.
Global oil players have substantial capacity unutilised and could have moved
more strongly to reduce supply pressure for oil and gas, with crude pricing
doubling over the course of 2021.
“[A factor] that caused these high prices is that the position of some of the
major oil and gas suppliers, and some of the countries did not take, in our
view, a helpful position in this context,” said IEA chief Fatih Birol.
Signatories to the OPEC+ agreement have around 6m bbl/day of spare
capacity un-used, Birol said, who also criticised moves by some gas
suppliers to keep storage levels low in Europe despite the extreme price
spikes seen in late 2021.
“Some of the key strains in today’s markets may well be considered artificial,”
he added.
Price for key European crude oil benchmark Brent stood at over $82/bbl in
early spot trading on Thursday, while US WTI futures were trading for over
$78/bbl.
Following calls for OPEC to intervene more strongly to arrest spiking oil
prices, US President Joe Biden announced on Tuesday plans for a
coordinated release of crude oil from the US Strategic Petroleum Reserves
(SPR), with China. The UK, South Korea, Japan and India are also expected
to release stocks.
Despite the intervention, oil prices rose that day and have continued to
increase through the week. OPEC+ countries have so far pledged to
continue gradually unwinding production curbs at a rate of 400,000 bbl/day
each month through to late 2022, but has declined to accelerate that
schedule.
Artificial supply tightness is one of several factors driving high crude pricing,
Birol said, with the pace of the economic recovery this year also pushing up
pricing. The IMF projected in October that global GDP for 2021 is likely to
stand at 6%, up from earlier projections of 5.5%.
The pace of the economic recovery pushed crude demand growth to multi-
decade highs, with year on year increases of 7% expected for the sector, and
DID YOU KNOW? 5% expected for natural gas, according to the IEA.
Despite the push for emissions reduction policies, 2021 is also likely to stand
When plants are under attack from
insects, they let out aromas that warn as a banner year for the coal sector, which stands to grow 10%, the most
other plants and entice the insects' substantial demand growth in the history of the market.
predators.
Grapes light on fire in the microwave. “This rapid growth put a lot of pressure on energy supply chains, a factor
Mars constantly makes a humming behind energy prices,” Birol said.
noise.
Extreme weather events seen during the year in the US and China, and
droughts in Brazil curbing hydropower capacity, also drove current pricing
levels, Birol said.

Source: https://www.hellenicshippingnews.com/oil-price-spikes-driven-by-artificial-tightness-spare-capacity-underutilised-iea/