OIL FUTURES: Crude complex extend gains on forecast fall in 2022 US crude production

Crude oil futures rose throughout the morning session in Europe May 11, extending gains from the Asian trading session, on concerns about the US NOPEC legislation that seeks to target oil producers like the OPEC and also as the Energy Information Administration trimmed its US crude production outlook by 100,000 b/d for 2022.

At 1200 GMT, the ICE July Brent futures contract was up $3.10/b at $105.55/b while the NYMEX June WTI light sweet crude contract was down $3.32/b at $103.07/b.

Targeted by the NOPEC, or No Oil Producing and Exporting Cartels, legislation in the US that would allow antitrust lawsuits against the producer alliance, top OPEC officials said May 10 the bill would worsen market volatility by driving away investment in the oil industry.

OPEC and its allies are being blamed unfairly for the energy crisis, when other commodities are also seeing high prices, Saudi Arabian Energy Minister Prince Abdulaziz bin Salman said.

“The world needs to wake up. The world is running out of energy capacity at all levels. It is a reality,” Prince Abdulaziz said at the World Utilities Congress in Abu Dhabi. “The world needs to work collectively, comprehensively in salvaging the world economy from supply chain issues, including energy.”

The spat between the OPEC+ members and the US brings further uncertainty to the market on top of the fact that the organization has missed its quotas’ production in April. The gap between OPEC+ production and quotas rose to a record 2.59 million b/d as 13 out of the 19 countries with quotas struggled to hit their output targets, according to a latest survey by S&P Global Commodity Insights May 9.

“Saudi Arabia might decide to not go hand-in-hand anymore [with the US] and be more independent from now on […] this [NOPEC legislation] is one of the elements behind [May 11 rise in prices],” said Bjarne Schieldrop, chief analyst of commodities at SEB Bank.

Meanwhile, US oil production is still expected to grow as a result of higher crude prices, but the EIA trimmed its outlook by 100,000 b/d for 2022. It now sees US drillers pumping 11.91 million b/d in 2022 and 12.85 million b/d in 2023, which would mark an all-time high.

US crude supply averaged 12.3 million b/d in 2019. The EIA raised its outlook for WTI prices to $98.20/b in 2022, up 24 cents from last month’s forecast, and to $93.24/b in 2023, up $4.67/b. Brent prices are expected to average $103.35/b in 2022, down 2 cents from last month, and $97.24/b in 2023, up $4.67/b.

“Sanctions on Russia and other independent corporate actions contributed to falling oil production in Russia and continue to create significant market uncertainties about the potential for further oil supply disruptions,” the EIA said.

“The biggest concern for the global oil market is around supply in the short to medium term, given the uncertainty over Russian supply. And the downward revisions to 2022 output estimates will do little to ease these concerns.” said ING analysts Warren Patterson and Wenyu Yao in a note.