U.S. West Texas Intermediate and international-benchmark Brent crude oil futures were higher late Friday after the International Energy Agency (IEA) said the global oil markets were tight, but further added that Saudi Arabia and the United Arab Emirates could ease oil market volatility. Meanwhile, U.S. drillers continued to add rigs in an effort to boost production to meet future demand.
Bullish IEA Outlook
The International Energy Agency (IEA) raised its 2022 demand forecast and expects global demand to expand by 3.2 million barrels per day (bpd) this year, reaching an all-time record 100.6 bpd.
The IEA added that Saudi Arabia and the United Arab Emirates could help to calm volatile oil markets if they pumped more crude, adding that the OPEC+ alliance produced 900,000 bpd below target in January.
The two OPEC producers have the most spare production capacity and could help to relieve dwindling global oil inventories that have been among factors pushing prices towards $100 a barrel, deepening inflation worldwide.
The IEA said that effective spare capacity could fall to 2.5 million barrels per day (bpd) by the end of the year, held up almost entirely by Saudi Arabia and, to a lesser extent, the UAE.
“These risks, which have broad economic implications, could be reduced if producers in the Middle East with spare capacity were to compensate for those running out,” the Paris-based agency said in its monthly oil report.
OPEC Sees Adds Demand to Forecast on Strong Pandemic Recovery
OPEC said on Thursday world oil demand might rise even more steeply this year as the global economy posts a strong recovery from the pandemic, a development that would underpin prices already at a seven-year high, Reuters reported.
Tight oil supply has also given impetus to booming energy markets, and the report from the Organization of the Petroleum Exporting Countries also showed the group undershot a pledged oil-output rise in January under its pact with allies.
In the report, OPEC said it expected world oil demand to rise by 4.15 million barrels per day (bpd) this year, unchanged from its forecast last month, following a steep rise of 5.7 million bpd in 2021.
US Drillers Add Most Oil Rigs in a Week Since February 2018 – Baker Hughes
U.S. energy firms this week added the most oil rigs in four years as crude prices held near their highest since 2014, prompting drillers to seek more profit, Reuters reported.
The oil and gas rig count, an early indicator of future output, rose 22 in the week to February 11, in its biggest hike since February 2018. At 635, the count was now at its highest since April 2020, energy services firm Baker Hughes Co said in its closely followed report on Friday.
Baker Hughes said the total rig count was up 238, or 60%, over this time last year.
U.S. oil rigs rose 19 to 516 this week, their highest since April 2020, while gas rigs rose two to 118, their highest since January 2020.
With the IEA and OPEC predicted stronger demand, the increase in U.S. output should be absorbed easily so these traditional supply/demand fundamentals remain bullish.
The bearish wildcard is the U.S.-Iran nuclear deal. The bullish wildcard is the Ukraine-Russia crisis.
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This article was originally posted on FX Empire