Analys
OPEC+ is holding good cards and a steady course


OPEC+ is to meet virtually in Vienna today for its official half-yearly meeting. The bull-recipe is still intact: ”Reviving demand, muted US shale oil response and controlled/restrained supply from OPEC+”. This will drive inventories yet lower and prices yet higher. There are no signs of division within the group and we expect it to hold on to a steady course with very good control of the market. We stick to our forecast of a Brent crude oil price averaging USD 75/bl in Q3-21 with Brent at times trading to USD 80 – 85/bl. Come Q4-21 however we think that the group increasingly will have to consider reviving US shale oil production.
Brent crude jumped above USD 70/bl for the first time since May 2019 on signals from OPEC+ of continued reviving demand and a tightening market with plenty of room for more oil from the group in H2-2021.

Today OPEC+ will meet virtually in Vienna for their official half yearly meeting to discuss and decide on production strategies for the second half of this year. Yesterday its Joint Technical Committee (JTC) presented its outlook for the supply/demand balance for the rest of the year. It depicted continued reviving demand and a tightening balance with an expected inventory draw of 2 – 2.5 m bl/d from August to December.
What it shows is that it is most likely plenty of room (and need) for a further increase of supply from the group beyond the planned increase of 2.1 m bl/d from May to July. It also makes it much easier for the group to accommodate the return of Iranian supplies to the market.
There are still very few signs of internal strife within the group. The group is thus likely to keep on going on a steady course. The bull-recipe for the oil market is still intact: “Reviving demand, muted US shale oil response together with controlled and restrictive supply from OPEC+” thus resulting in further declines in inventories and thus yet higher oil prices.
Given that the group now meets on a monthly basis it is less of a challenge to lay out a production strategy for H2-2021 since it can adjust and revise its plan on a monthly basis. I.e. it doesn’t need to have a full crystal ball view of how H2-2021 will play out.
The natural thing for the group to do now that global oil inventories are close to the 2015-19 average is to signal an additional increase of 2 m bl/d from August to December thus leading to an anticipated inventory draw of 0.5 m bl/d during that period if the JTC is correct in its projections on Monday.
The group signalled yesterday that the return of Iranian supplies will be gradual and managed and won’t create any supply shock into the market. Between 1-1.5 m bl/d of Iranian oil exports are probably already in the market. Thus a return of Iranian supplies probably implies an added supply of about 1 – 1.5 m bl/d of crude and condensates.
The likely continued strong oil demand revival in H2-2021 is handing OPEC+ with a good hand of cards to play from and there is no indication that they won’t play it wisely and for what it’s worth.
Looking into 2022 and beyond is however much more difficult. Supply is then likely to increase from Canada, Brazil, Russia, Kazakhstan, Iran, Iraq, Libya and of course also the US. Eventually also of course in Venezuela.
With respect to US shale oil. It is not so that nothing is happening. From January to April the number of completed shale oil wells increased by 8% on average every month and 10% in April. Losses in underlying production is currently running at 424 k bl/d per month. New production from the 754 completed wells in April however yielded close to 400 k bl/d that month. Another 10% increase in completed wells in May will leave US shale oil production at a steady state production level. Yet another 10% increase in completions in June would then place US shale oil production on an annualized production growth pace of 500 k bl/d without any further increase in the number of completed wells beyond June. Add in production growth of NGLs and you have a solid production growth rate in the US. And with respect to drilling rigs. That number is increasing as well even though not at the wild pace seen from June 2019 onwards it is still rising at a rate of about 15 – 20 rigs per month thus placing US shale oil into expanding territory as the number of drilling rigs surpasses the 450 mark needed for expansion sometime in July/August this year. Expansion for 2022 that is.
Thus OPEC+ will need to keep a close eye on US shale oil players. If it looks like they aim to eat into the market share of OPEC+ by expanding too much then they are bound to be taught yet another lesson of low prices.
Our standing forecast for quite some time now is for Brent crude to average USD 75/bl in Q3-2021. That means that Brent crude at times is likely to trade to USD 80/bl to USD 85/bl. This will help to drag 2022/23 forward prices up towards USD 70/bl. Producers should bid their time well and look closely at securing forward hedges at such levels.
As the autumn progresses we expect US shale oil producers to show more vigour with reviving activity and rising production leading to a more cautious oil market and likely softer oil prices in Q4-21.
Current crude oil forward prices curves versus the 50 year real average crude oil price in 2019 USD according to BP. One should not expect oil prices to deliver at USD 70-80-90/bl in the years to come.

Analys
Tightening fundamentals – bullish inventories from DOE

The latest weekly report from the US DOE showed a substantial drawdown across key petroleum categories, adding more upside potential to the fundamental picture.

Commercial crude inventories (excl. SPR) fell by 5.8 million barrels, bringing total inventories down to 415.1 million barrels. Now sitting 11% below the five-year seasonal norm and placed in the lowest 2015-2022 range (see picture below).
Product inventories also tightened further last week. Gasoline inventories declined by 2.1 million barrels, with reductions seen in both finished gasoline and blending components. Current gasoline levels are about 3% below the five-year average for this time of year.
Among products, the most notable move came in diesel, where inventories dropped by almost 4.1 million barrels, deepening the deficit to around 20% below seasonal norms – continuing to underscore the persistent supply tightness in diesel markets.
The only area of inventory growth was in propane/propylene, which posted a significant 5.1-million-barrel build and now stands 9% above the five-year average.
Total commercial petroleum inventories (crude plus refined products) declined by 4.2 million barrels on the week, reinforcing the overall tightening of US crude and products.


Analys
Bombs to ”ceasefire” in hours – Brent below $70

A classic case of “buy the rumor, sell the news” played out in oil markets, as Brent crude has dropped sharply – down nearly USD 10 per barrel since yesterday evening – following Iran’s retaliatory strike on a U.S. air base in Qatar. The immediate reaction was: “That was it?” The strike followed a carefully calibrated, non-escalatory playbook, avoiding direct threats to energy infrastructure or disruption of shipping through the Strait of Hormuz – thus calming worst-case fears.

After Monday morning’s sharp spike to USD 81.4 per barrel, triggered by the U.S. bombing of Iranian nuclear facilities, oil prices drifted sideways in anticipation of a potential Iranian response. That response came with advance warning and caused limited physical damage. Early this morning, both the U.S. President and Iranian state media announced a ceasefire, effectively placing a lid on the immediate conflict risk – at least for now.
As a result, Brent crude has now fallen by a total of USD 12 from Monday’s peak, currently trading around USD 69 per barrel.
Looking beyond geopolitics, the market will now shift its focus to the upcoming OPEC+ meeting in early July. Saudi Arabia’s decision to increase output earlier this year – despite falling prices – has drawn renewed attention considering recent developments. Some suggest this was a response to U.S. pressure to offset potential Iranian supply losses.
However, consensus is that the move was driven more by internal OPEC+ dynamics. After years of curbing production to support prices, Riyadh had grown frustrated with quota-busting by several members (notably Kazakhstan). With Saudi Arabia cutting up to 2 million barrels per day – roughly 2% of global supply – returns were diminishing, and the risk of losing market share was rising. The production increase is widely seen as an effort to reassert leadership and restore discipline within the group.
That said, the FT recently stated that, the Saudis remain wary of past missteps. In 2018, Riyadh ramped up output at Trump’s request ahead of Iran sanctions, only to see prices collapse when the U.S. granted broad waivers – triggering oversupply. Officials have reportedly made it clear they don’t intend to repeat that mistake.
The recent visit by President Trump to Saudi Arabia, which included agreements on AI, defense, and nuclear cooperation, suggests a broader strategic alignment. This has fueled speculation about a quiet “pump-for-politics” deal behind recent production moves.
Looking ahead, oil prices have now retraced the entire rally sparked by the June 13 Israel–Iran escalation. This retreat provides more political and policy space for both the U.S. and Saudi Arabia. Specifically, it makes it easier for Riyadh to scale back its three recent production hikes of 411,000 barrels each, potentially returning to more moderate increases of 137,000 barrels for August and September.
In short: with no major loss of Iranian supply to the market, OPEC+ – led by Saudi Arabia – no longer needs to compensate for a disruption that hasn’t materialized, especially not to please the U.S. at the cost of its own market strategy. As the Saudis themselves have signaled, they are unlikely to repeat previous mistakes.
Conclusion: With Brent now in the high USD 60s, buying oil looks fundamentally justified. The geopolitical premium has deflated, but tensions between Israel and Iran remain unresolved – and the risk of missteps and renewed escalation still lingers. In fact, even this morning, reports have emerged of renewed missile fire despite the declared “truce.” The path forward may be calmer – but it is far from stable.
Analys
A muted price reaction. Market looks relaxed, but it is still on edge waiting for what Iran will do

Brent crossed the 80-line this morning but quickly fell back assigning limited probability for Iran choosing to close the Strait of Hormuz. Brent traded in a range of USD 70.56 – 79.04/b last week as the market fluctuated between ”Iran wants a deal” and ”US is about to attack Iran”. At the end of the week though, Donald Trump managed to convince markets (and probably also Iran) that he would make a decision within two weeks. I.e. no imminent attack. Previously when when he has talked about ”making a decision within two weeks” he has often ended up doing nothing in the end. The oil market relaxed as a result and the week ended at USD 77.01/b which is just USD 6/b above the year to date average of USD 71/b.

Brent jumped to USD 81.4/b this morning, the highest since mid-January, but then quickly fell back to a current price of USD 78.2/b which is only up 1.5% versus the close on Friday. As such the market is pricing a fairly low probability that Iran will actually close the Strait of Hormuz. Probably because it will hurt Iranian oil exports as well as the global oil market.
It was however all smoke and mirrors. Deception. The US attacked Iran on Saturday. The attack involved 125 warplanes, submarines and surface warships and 14 bunker buster bombs were dropped on Iranian nuclear sites including Fordow, Natanz and Isfahan. In response the Iranian Parliament voted in support of closing the Strait of Hormuz where some 17 mb of crude and products is transported to the global market every day plus significant volumes of LNG. This is however merely an advise to the Supreme leader Ayatollah Ali Khamenei and the Supreme National Security Council which sits with the final and actual decision.
No supply of oil is lost yet. It is about the risk of Iran closing the Strait of Hormuz or not. So far not a single drop of oil supply has been lost to the global market. The price at the moment is all about the assessed risk of loss of supply. Will Iran choose to choke of the Strait of Hormuz or not? That is the big question. It would be painful for US consumers, for Donald Trump’s voter base, for the global economy but also for Iran and its population which relies on oil exports and income from selling oil out of that Strait as well. As such it is not a no-brainer choice for Iran to close the Strait for oil exports. And looking at the il price this morning it is clear that the oil market doesn’t assign a very high probability of it happening. It is however probably well within the capability of Iran to close the Strait off with rockets, mines, air-drones and possibly sea-drones. Just look at how Ukraine has been able to control and damage the Russian Black Sea fleet.
What to do about the highly enriched uranium which has gone missing? While the US and Israel can celebrate their destruction of Iranian nuclear facilities they are also scratching their heads over what to do with the lost Iranian nuclear material. Iran had 408 kg of highly enriched uranium (IAEA). Almost weapons grade. Enough for some 10 nuclear warheads. It seems to have been transported out of Fordow before the attack this weekend.
The market is still on edge. USD 80-something/b seems sensible while we wait. The oil market reaction to this weekend’s events is very muted so far. The market is still on edge awaiting what Iran will do. Because Iran will do something. But what and when? An oil price of 80-something seems like a sensible level until something do happen.
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