The oil market also has cause to celebrate Presidents' Day

The oil market also has cause to celebrate Presidents' Day

Elisa Maria Giannetto
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IEA's oil supply and demand estimates are pushing up prices and enthusiasm. Meanwhile, today in the US the nation's first president George Washington's birthday is being commemorated

While America is celebrating Presidents' Day, the markets are closed and optimism is skyrocketing. The positive wave is being generated by the latest IEA estimates, the agency having raised its forecasts on global growth in oil demand. According to the International Energy Agency, in 2017 1.4 million barrels a day will be consumed. And while the demand curve is on the up, supply is slackening due to the decrease in oil production decreed by the OPEC agreement, the figure being estimated at around 600,000 barrels less than in the first six months of 2017. A forecast that has triggered the enthusiasm of investors and raised hopes of a more balanced and stable market where WTI, West Texas Intermediate could reach a historic high. The trend is the result of an interim analysis on the progress of the OPEC agreement: The signatory countries are in fact proceeding at a brisk pace, having achieved 90% of the requirements laid down in December in less than two months. "The OPEC cuts are far deeper than expected and there is no sign that portends a reversal" Mike Wittner, head of commodities research at Société Générale SA in New York told Bloomberg. Yet it is the US that is specifically providing the only brake on the enthusiasm, where exploration, drilling and extraction activities are increasing. US oil reserves reached 518.1 million last week, the highest ever since 1982. Another research conducted by Goldman Sachs estimated that "oil production in the US could rise by 405,000 barrels per day in a year in the Permian Basin, Eagle Ford and Bakken Niobrara." Overall therefore, this year in the United States we can on average count upon 130,000 barrels per day more than a year ago. Yet optimism is not lacking, and not just because of America’s public holiday celebrations, but because, as explains Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts, "investors are proving more focused on OPEC actions than on US stocks." This is why those who are betting on the rise in oil prices outstrip the more pessimistic, at least in recent days.