Brent futures slip as US shale production reaches pre-pandemic levels

Front-month ICE Brent has decreased by $1.20/bbl on the day, to $94.06/bbl at 09.00 GMT.

PHOTO: OPEC forecasts Russian crude supply to decline by 700,000 b/d by 2030 due to geopolitical tensions surrounding its invasion of Ukraine. Getty Images

Upward pressure:

OPEC has predicted that global oil demand will rise from almost 97 million b/d in 2021 to around 109.5 million b/d in 2035 in its world oil outlook report. It expects oil to remain the dominant source of primary energy around the world, despite a “plateau in demand growth” from 2035.

Market analysts at Energy Aspects and Goldman Sachs have warned that Western countries are at risk of facing a winter supply crunch, mainly on the back of EU sanctions on Russian crude imports.

"The further we move into November, the closer we get to the EU-Russian oil embargo taking effect, which will have a material impact on Russia's supply and by extension global supply," says Stephen Innes, managing partner SPI Asset Management.

As concerns around the already tight oil market grow, OPEC forecasts that Russian crude supply will decline by 700,000 b/d by 2030 due to geopolitical tensions surrounding its invasion of Ukraine, while US crude supply is expected to peak in the same period.

Downward pressure:

The Chinese government's zero-Covid policy has resulted in continuous lockdowns and Covid clampdowns in major Chinese cities affecting millions of people. Strict pandemic restrictions have caused China’s factory and service activity to fall in October, suggesting that the Chinese economy continues to struggle.

Shale oil production in the US reached nearly 12 million b/d in August, the highest level since the beginning of the Covid-19 pandemic. According to a Reuters poll, this will lead to a rise of around 300,000 bbls in US crude oil stocks in the week to 28 October.

Meanwhile, oil majors in the US are being urged by US President Joe Biden to boost production to reduce fuel prices, threatening a higher tax on excess profits if they do not.

By Konica Bhatt

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