(BFM Bourse) – Driven by the surge in energy prices and the very gradual reopening of the OPEC + valves, the prices of crude oil references have risen nearly 5% during the past week, reaching unprecedented levels for 7 years. And while the market now appears to be structurally in deficit, this increase could well continue, or even increase.

18 months after plunging to their all-time low (to less than $ 20 a barrel for Brent and in negative territory for WTI), wiped out by plummeting demand in response to the global pandemic, crude prices are already left with a vengeance. Over the past week, the contract on the barrel of WTI has climbed by nearly 5% – a peak since November 2014 – while that of Brent has gained more than 4% on a background of confirmation, by OPEC +, of a very gradual reopening of the sluice gates despite a quickly resumed demand, exacerbated by a fundamental movement of soaring energy prices.

The prices of the two world references are also starting the week as they spent the previous one: on the rise. Shortly after 10 a.m., a barrel of North Sea Brent gained 1.4% to 83.7 dollars (less than 3 dollars from a peak since 2014) when the Texan “light sweet crude” hit a new high since the 30 October 2014 (+ 1.6% to 81.1 dollars).

And now ? Are we heading towards a price per barrel (around 159 liters) of more than $ 100, as was already prophesied in mid-June by Benjamin Louvet, manager specializing in commodities at Ofi Asset Management? This hypothesis actually continues to hold the line according to the expert, who evokes “a chicken and egg problem coming from an ubiquitous situation”, namely that “we went about it the other way around to initiate the energy transition , by constraining supply without having a demand policy on the other side “.

Demand which is on the rise again

But today, OPEC and the IEA (International Energy Agency) say that world oil consumption will exceed its 2019 record in 2022 – contrary to what the boss of the British oil major BP Bernard Looney just a year ago, the latter having argued that global demand for black gold could have reached, in early 2020, a ceiling that would not have been matched.

Schematically, recalls Benjamin Louvet, “an oil well is like pushing a straw into a liquid pocket: as you extract the liquid the pressure in the pocket decreases and, if nothing is done , the yield decreases by 4 to 5% per year “. “We know how to fight against this natural depletion. The key is to invest massively to put new deposits into production. Maintaining constant global production requires 630 billion investments per year. Except that since 2016, we are approximately at 450 billion annual “capex”, a figure which fell between 300 and 350 billion last year. It happens what was to happen, namely that production is now limited in relation to consumption “.

There are now only two ways to solve the problem in the medium term, according to him: decrease demand or increase investment. And “we should not count on shale oil to rebalance the equation” he warns. “The US shale producers recently admitted that they only destroyed value between 2008 and 2020, with almost constantly negative free cash flows. Investors were fed up so these companies are moving on. an objective of productivity with an objective of profitability. Scott Sheffield, the boss of one of the leaders of the sector Pionneer Natural Resoruces, moreover explained to have had discussions with shareholders who told him that they would destroy all the producers of schist which would switch back to a productivist logic “adds Benjamin Louvet.

Return to full OPEC production in 2022?

“In the mid-2010s, the equation on the oil markets was a little different” agrees Vincent Manuel, director of investments at Indosuez Wealth Management. “When crude prices climbed above $ 60 a barrel, they then accelerated noticeably as new players (in shale and offshore in particular) became profitable, which re-stabilized the market. more necessarily the case today, due to lower capacity investments in recent years. It is estimated that the current imbalance would be of the order of 1.5 million barrels per day (mbd) currently, with a supply worldwide at 97.5 mbd and demand at 99 mbd. Before the crisis, supply had reached a peak at 102 mbd ”adds the manager.

But if he notes that we are “in a transitional phase where the recovery in demand is probably stronger than that of supply”, Vincent Manuel does not imagine the prices to soar permanently. “If we rely on the” futures “market in a” backwardation “situation (when medium-term prices are lower than the prices of short maturities, Editor’s note), we should have a high plateau for a few months before a declining prices “he says. By imagining a return to full production from spring 2022 if Opec + decides to stick to its plan set last July, to put 400,000 barrels per day on the market each month from August 2021 to April 2022, the market specialist expects that “these additional 5 million barrels (in the long term) can cover most of the increase in demand over the same period and allow the market to be rebalanced next year”.

Tap into strategic stocks

A “reassuring” scenario in which Benjamin Louvet does not believe, according to whom “the market is really facing a major problem, as evidenced by the words of the US Minister of Energy” on Wednesday, the latter having said he was ready to consider drawing on strategic stocks. “Historically, this solution does not work well because it appears to investors as a solution of last resort, so prices drop momentarily before rising,” he adds. The American presidents have in fact only resorted to strategic reserves 3 times in the past: during the military operation carried out by the United States following the invasion of Kuwait by Iraq in 1991, during Hurricane Katrina in 2005 and during the uprising in Libya in 2011. The mere fact that this solution is mentioned speaks volumes about the current state of the market.

In this confirms Benjamin Louvet in his scenario of a “barrel to more than 100 dollars next year”. “We could postpone the deadline by twisting the arm of OPEC + but the cartel does not have infinite production capacities either” – these are estimated at around 2 mbj, half of which is heavy oil which does not not of interest to refiners. “In the short term, the United States (which reminded Saudi Arabia last week that more expensive oil fuels inflation and threatens the recovery of some economies, with a risk to demand in the second step, Editor’s note) could put pressure on OPEC which could solve the problem this winter but it will rest in April or May next, when the refiners will get back in battle order to face the peak summer demand “- between 1 and 1.5 mbd higher than the winter peak, counter-intuitively, because of the large departures on vacation (cars + air transport) and the demand for air conditioners, especially in the Middle East.

Quentin Soubranne – ©2021 BFM Bourse

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