$70 Oil by the end of the Year? It Could Happen.

What a difference three months makes. Three months ago today, Russia and Saudi Arabia had just embarked on a completely irrational effort to flood the global oil markets after Russia had basically blown up the OPEC+ supply limitation agreement when it balked at making an additional few hundred thousand barrels of oil per day (bopd) in cuts.

But on Saturday, those same two big producers cajoled the rest of the countries participating in OPEC+ to extend the deep, 9.7 million bopd May/June supply limits through the end of July. The cuts had been scheduled to scale back to a combined 7.7 million bopd on July 1. Reuters reports that Saudi Arabia has now reduced its daily production by 2.24 million bopd from its market-flooding level in April, while Russia – which could not stomach a reduction of about 200,000 bopd back on March 4, has cut its own daily production by more than 900,000 barrels.

It’s pretty amazing how single digit – and even momentary negative – crude prices will change an oil minister’s perspective on what constitutes an appropriate level of output.

The OPEC+ members also pledged to monitor and reassess appropriate supply levels on a monthly basis, beginning with their next meeting, which is scheduled for June 18.

Combined with dramatic reductions in crude output in the U.S. and Canada and a more-rapid-than-expected recovery in demand, the extension of the OPEC+ May/June quotas sets the stage for a more rapid re-balancing of the global markets. Bjornar Tonhaugen, Rystad Energy’s head of oil markets, said that “Today’s deal is a positive development and, unless a second Covid-19 wave hits the world, it will be the backbone of a quick recovery for the energy industry. That is due to the oil stocks decrease that we will see as a result of the production deficit. Stocks are now what keep prices at relatively low levels and the quicker they fall, the faster we will see prices rise.”

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5 thoughts on “$70 Oil by the end of the Year? It Could Happen.

  1. phineas gage - June 7, 2020

    Great news–locally here in Georgia the gas prices have been steadily rising. Usually I don’t see it as a good thing, but now it means rapid economic recovery. $70 oil would mean thousands and thousands of domestic oil industry jobs coming back over the summer.

    With the riots, I think the Covid scam is well and fully exposed. People aren’t buying it anymore, now or later.

    streiff pretty much nails it:

    https://www.redstate.com/streiff/2020/06/07/850911/

  2. brian - June 7, 2020

    The oil price climb for us here in Canukistan is a double edged sword. While the ‘patch’ suffers when prices are depressed people in the industry know its a cyclical thing that happens repeatedly. Companies appear and disappear as the patch ebbs and wanes.

    For us consumers there is zero competition so prices are always inflated. When oil prices drop our fuel prices stay high and companies say its because of the high priced fuel instream. Once that more ‘expensive’ fuel clears then prices will drop… thats the spin. Its odd tho that when fuel prices are low and crude prices jump we get an increase in fuel prices immediately… odd, huh…

    Because the govt(s) fed and prov, take approx 50% taxes in fuel costs they do nothing to control fuel pricing and love higher prices. Not sure why… Thats why when you drive into ANY canukistan town or city every fuel station has the same price for fuel. And rest assured the govt has looked into this and stated there is no price fixing by the companies. And I totally believe them.

    Fuel prices here, in my small town is $1.13/ litre. or USD $3.18 / US gal. Any market increase is immediately placed at the pumps, any market downturn won’t see pump prices until 2 – 4 weeks after market changes.

    So for us… its a double edged sword… cuts both ways

    1. phineas gage - June 7, 2020

      Wow, had no idea. In the States gas prices vary quite a bit, even in the same town.

      Here in my neck of the Georgia woods, prices dropped all the way to $1.55.gallon during the peak of the scamdemic. Now it has jumped up about 20 cents.

      1. Gregg - June 7, 2020

        I suspect the state by state and region by region variance in the US has more to do with the individual state taxes which, is about .73 per gal in CA .60 in MI (Whitmer), and .77 in PA, to about .38 in TX, and .43 in TN according to the 2019 World Almanac.

        Another factor is the extreme federal and state environmental regulations which require many different blends, and seasonal blends to fight pollution and climate change – so the “experts” say. And I’m sure different states allow different mark ups, but from what I remember the norm is about .15 to .20 per gallon. That is why when gas costs about 2.50 in TN it cost over 4.00 in CA and NYC.

  3. Ryder - June 7, 2020

    Not likely. They will stabilize around $50 but not until August.

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