Analys
Increased OPEC power in 2021 requires demand revival


Brent crude rebounded almost 1% yesterday to $64.62/bl and continues to tick a little higher this morning but still below the $65/bl mark. The signing of the US – China trade deal has given optimism for a revival in global manufacturing and thus stronger oil demand growth and this is what gives the oil price some vigour. It is very hard for OPEC to fight a war on two fronts with both rising non-OPEC supply and weakening global oil demand growth at the same time. A potential revival in global manufacturing (and oil demand growth) would thus be a great relief for OPEC and remove a lot of downside price risk for the oil price. The oil price is at its current level at the mercy of OPEC and OPEC’s current strategy of “price over volume”. If global oil demand continues at last year’s weaker than normal 1% growth rate also in 2020 and 2021 then OPEC and its allies might be forced to switch strategy to “volume over price” once again.

The monthly oil market report from EIA on Tuesday projected a lukewarm but stable outlook for the global oil market in 2020 and 2021 with Brent crude oil prices projected to average $64.8/bl in 2020 rising to $67.5/bl in 2021. It lifted its US shale oil production projection a tad for 2020 (+0.15 m bl/d) and extended the projection to 2021 with an average YoY growth of 0.4 m bl/d in 2021. That is a far cry from latest years booming US shale oil production growth. A shale oil production growth of +0.4 m bl/d per year is still a lot of new oil though.
Key assumptions in the US EIA forecast is that global demand will grow by 1.3% p.a. for the coming two years and that OPEC will stick to its current “price over volume” strategy and continue to hold back supply. EIA’s supply/demand balance “allows” OPEC to produce 29.2 m bl/d on average through the forecast horizon. The sharp decline in the need for OPEC oil over the latest couple of years is projected to halt and stabilize at around that level and then rise marginally in 2021. I.e. it projects that OPEC will be handed back a little bit of volume and market power and thus room to manoeuvre towards the end of 2021. But not a lot.
If EIA’s forecast materializes with no major disruptions in middle east supply, then we are looking at a very stable oil market with low oil price volatility for the coming two years: US shale oil production growth is slowing down and OPEC’s challenged position over the latest years is stabilizing while global oil inventories are projected to stay elevated and plentiful.
The oil price is now getting some vigour on the back of the US – China trade deal with hopes for global manufacturing revival and stronger oil demand growth. If this materializes it will put OPEC on a more stable footing and thus increase the probability that they will be able to stick with “price over volume” throughout the forecast horizon to end of 2021.
But even with a historically normal oil demand growth of 1.3% per year the oil price will still be at the mercy of OPEC’s choice of market strategy even in 2021. The US EIA is projecting non-OPEC production to grow by 0.9 m bl/d in 2021. If global oil demand grows at 1.3% that year it will hand some volume back to OPEC. Global inventories will still be high at that point, but it could be the gradual start of some lost volume starting to return back to OPEC.
True oil market strength won’t come before non-OPEC production starts to grow more slowly than global oil demand growth. This would mean increased call-on-OPEC crude oil and would hand some of the lost volume over the past years back to OPEC again. It would place OPEC in proper control of the market again with significantly reduced risk for a switch to back to “volume over price” (which would lead to a collapse in the oil price).
The US EIA projects that non-OPEC production will grow at +0.9 m bl/d YoY in 2021. This is below the historical oil demand growth rate of about 1.3% YoY (about 1.3 m bl/d) and thus projects a possible return of volume back to OPEC. That’s the turning point OPEC is looking for. However, the increase in call-on-OPEC in 2021 cannot all that easily be realized as increased production because inventories will still be high. If OPEC wants to draw down inventories at that time, they will still need to hold back production at unchanged level. EIA’s outlook is positive for OPEC, but it is at the very end of the two-year forecast period and highly vulnerable if global oil demand growth is weak. Global manufacturing revival will thus be key.
Ch1: US EIA Supply/demand balance. Fairly stable with plenty of oil in the market. Could imply low price volatility if OPEC sticks to its “price over volume” strategy all through the period. Some deficit in 2021 hands some volume back to OPEC as non-OPEC production is projected to grow at only 0.9 m bl/d YoY that year versus normal oil demand growth of 1.3 m bl/d.

Ch2: EIA projects OECD inventories to rise in 2020 and then a marginal decline in 2021. Plenty of oil in the market next two years unless we get a considerable supply outage in the middle east.

Ch3: EIA’s historical and projected OPEC production. Stabilizing next two years after a steep decline past two years. I.e. OPEC’s position looks set to stabilize at around 29.2 m bl/d versus a production of 29.6 m bl/d in December. What the outlook shows is that oil prices forecasted by the US EIA are totally reliant on OPEC sticking with “price over volume” for the coming two years and only produce about 29.2 m bl/d. No more

Ch4: The US EIA lifted its projection for US shale oil production by 150 k bl/d in 2020 and extended its forecast to 2021. Steady growth rate of 0.4 m bl/d in 2021. No flat-lining from 2020 to 2021

Analys
Brent crude ticks higher on tension, but market structure stays soft

Brent crude has climbed roughly USD 1.5-2 per barrel since Friday, yet falling USD 0.3 per barrel this mornig and currently trading near USD 67.25/bbl after yesterday’s climb. While the rally reflects short-term geopolitical tension, price action has been choppy, and crude remains locked in a broader range – caught between supply-side pressure and spot resilience.

Prices have been supported by renewed Ukrainian drone strikes targeting Russian infrastructure. Over the weekend, falling debris triggered a fire at the 20mtpa Kirishi refinery, following last week’s attack on the key Primorsk terminal.
Argus estimates that these attacks have halted ish 300 kbl/d of Russian refining capacity in August and September. While the market impact is limited for now, the action signals Kyiv’s growing willingness to disrupt oil flows – supporting a soft geopolitical floor under prices.
The political environment is shifting: the EU is reportedly considering sanctions on Indian and Chinese firms facilitating Russian crude flows, while the U.S. has so far held back – despite Bessent warning that any action from Washington depends on broader European participation. Senator Graham has also publicly criticized NATO members like Slovakia and Hungary for continuing Russian oil imports.
It’s worth noting that China and India remain the two largest buyers of Russian barrels since the invasion of Ukraine. While New Delhi has been hit with 50% secondary tariffs, Beijing has been spared so far.
Still, the broader supply/demand balance leans bearish. Futures markets reflect this: Brent’s prompt spread (gauge of near-term tightness) has narrowed to the current USD 0.42/bl, down from USD 0.96/bl two months ago, pointing to weakening backwardation.
This aligns with expectations for a record surplus in 2026, largely driven by the faster-than-anticipated return of OPEC+ barrels to market. OPEC+ is gathering in Vienna this week to begin revising member production capacity estimates – setting the stage for new output baselines from 2027. The group aims to agree on how to define “maximum sustainable capacity,” with a proposal expected by year-end.
While the IEA pegs OPEC+ capacity at 47.9 million barrels per day, actual output in August was only 42.4 million barrels per day. Disagreements over data and quota fairness (especially from Iraq and Nigeria) have already delayed this process. Angola even quit the group last year after being assigned a lower target than expected. It also remains unclear whether Russia and Iraq can regain earlier output levels due to infrastructure constraints.
Also, macro remains another key driver this week. A 25bp Fed rate cut is widely expected tomorrow (Wednesday), and commodities in general could benefit a potential cut.
Summing up: Brent crude continues to drift sideways, finding near-term support from geopolitics and refining strength. But with surplus building and market structure softening, the upside may remain capped.
Analys
Volatile but going nowhere. Brent crude circles USD 66 as market weighs surplus vs risk

Brent crude is essentially flat on the week, but after a volatile ride. Prices started Monday near USD 65.5/bl, climbed steadily to a mid-week high of USD 67.8/bl on Wednesday evening, before falling sharply – losing about USD 2/bl during Thursday’s session.

Brent is currently trading around USD 65.8/bl, right back where it began. The volatility reflects the market’s ongoing struggle to balance growing surplus risks against persistent geopolitical uncertainty and resilient refined product margins. Thursday’s slide snapped a three-day rally and came largely in response to a string of bearish signals, most notably from the IEA’s updated short-term outlook.
The IEA now projects record global oversupply in 2026, reinforcing concerns flagged earlier by the U.S. EIA, which already sees inventories building this quarter. The forecast comes just days after OPEC+ confirmed it will continue returning idle barrels to the market in October – albeit at a slower pace of +137,000 bl/d. While modest, the move underscores a steady push to reclaim market share and adds to supply-side pressure into year-end.
Thursday’s price drop also followed geopolitical incidences: Israeli airstrikes reportedly targeted Hamas leadership in Doha, while Russian drones crossed into Polish airspace – events that initially sent crude higher as traders covered short positions.
Yet, sentiment remains broadly cautious. Strong refining margins and low inventories at key pricing hubs like Europe continue to support the downside. Chinese stockpiling of discounted Russian barrels and tightness in refined product markets – especially diesel – are also lending support.
On the demand side, the IEA revised up its 2025 global demand growth forecast by 60,000 bl/d to 740,000 bl/d YoY, while leaving 2026 unchanged at 698,000 bl/d. Interestingly, the agency also signaled that its next long-term report could show global oil demand rising through 2050.
Meanwhile, OPEC offered a contrasting view in its latest Monthly Oil Market Report, maintaining expectations for a supply deficit both this year and next, even as its members raise output. The group kept its demand growth estimates for 2025 and 2026 unchanged at 1.29 million bl/d and 1.38 million bl/d, respectively.
We continue to watch whether the bearish supply outlook will outweigh geopolitical risk, and if Brent can continue to find support above USD 65/bl – a level increasingly seen as a soft floor for OPEC+ policy.
Analys
Waiting for the surplus while we worry about Israel and Qatar

Brent crude makes some gains as Israel’s attack on Hamas in Qatar rattles markets. Brent crude spiked to a high of USD 67.38/b yesterday as Israel made a strike on Hamas in Qatar. But it wasn’t able to hold on to that level and only closed up 0.6% in the end at USD 66.39/b. This morning it is starting on the up with a gain of 0.9% at USD 67/b. Still rattled by Israel’s attack on Hamas in Qatar yesterday. Brent is getting some help on the margin this morning with Asian equities higher and copper gaining half a percent. But the dark cloud of surplus ahead is nonetheless hanging over the market with Brent trading two dollar lower than last Tuesday.

Geopolitical risk premiums in oil rarely lasts long unless actual supply disruption kicks in. While Israel’s attack on Hamas in Qatar is shocking, the geopolitical risk lifting crude oil yesterday and this morning is unlikely to last very long as such geopolitical risk premiums usually do not last long unless real disruption kicks in.
US API data yesterday indicated a US crude and product stock build last week of 3.1 mb. The US API last evening released partial US oil inventory data indicating that US crude stocks rose 1.3 mb and middle distillates rose 1.5 mb while gasoline rose 0.3 mb. In total a bit more than 3 mb increase. US crude and product stocks usually rise around 1 mb per week this time of year. So US commercial crude and product stock rose 2 mb over the past week adjusted for the seasonal norm. Official and complete data are due today at 16:30.
A 2 mb/week seasonally adj. US stock build implies a 1 – 1.4 mb/d global surplus if it is persistent. Assume that if the global oil market is running a surplus then some 20% to 30% of that surplus ends up in US commercial inventories. A 2 mb seasonally adjusted inventory build equals 286 kb/d. Divide by 0.2 to 0.3 and we get an implied global surplus of 950 kb/d to 1430 kb/d. A 2 mb/week seasonally adjusted build in US oil inventories is close to noise unless it is a persistent pattern every week.
US IEA STEO oil report: Robust surplus ahead and Brent averaging USD 51/b in 2026. The US EIA yesterday released its monthly STEO oil report. It projected a large and persistent surplus ahead. It estimates a global surplus of 2.2 m/d from September to December this year. A 2.4 mb/d surplus in Q1-26 and an average surplus for 2026 of 1.6 mb/d resulting in an average Brent crude oil price of USD 51/b next year. And that includes an assumption where OPEC crude oil production only averages 27.8 mb/d in 2026 versus 27.0 mb/d in 2024 and 28.6 mb/d in August.
Brent will feel the bear-pressure once US/OECD stocks starts visible build. In the meanwhile the oil market sits waiting for this projected surplus to materialize in US and OECD inventories. Once they visibly starts to build on a consistent basis, then Brent crude will likely quickly lose altitude. And unless some unforeseen supply disruption kicks in, it is bound to happen.
US IEA STEO September report. In total not much different than it was in January

US IEA STEO September report. US crude oil production contracting in 2026, but NGLs still growing. Close to zero net liquids growth in total.

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