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A market analyst has written an article stating that the rise in oil prices in 2021 is far from over, and the decline in inventory worldwide indicates that the market is far from reaching equilibrium. OPEC+does not seem to be in a hurry to increase supply to the market. The December Brent spot premium reached its highest level since 2013 and is another bullish indicator of oil prices.

Even though it has reached its highest level in recent years, there is still room for further price increases this winter. Analysts say that at least the short-term market fundamentals are like this. Global inventory has fallen below the five-year average level before the epidemic, while demand has rebounded. The energy crisis in Europe and Asia, as well as record high natural gas and coal prices, provide more support for bullish oil prices in the coming months. The December Brent spot premium also indicates that the oil market is tight and there is still room for oil prices to rise.

As demand rebounds, oil prices rise

In terms of demand, the economic recovery has driven global oil demand in recent months, causing global inventories to fall below recent averages.

Analysts pointed out that the commercial oil inventory of the United States and OECD developed economies as a whole has fallen below the average level of the first five years of the COVID-19 epidemic.

The International Energy Agency (IEA) stated in its latest monthly report last week that the OECD's commercial inventory in August was 162 million barrels lower than the five-year average before the pandemic. Preliminary data from the United States, Europe, and Japan shows that onshore oil inventories further decreased by 23 million barrels in September.

The IEA also pointed out that compared to "normal" markets without natural gas and coal shortages, the energy crisis in Europe and Asia may increase global oil demand by 500000 barrels per day and increase global oil demand forecasts for 2021 and 2022.

OPEC+maintains market tension, oil supply lags behind demand

Despite the outbreak of COVID-19 epidemic in the United States and Asia this summer, the supply growth of the oil market has been lagging behind the pace of demand growth.

Firstly, for most of the period from late August to September, Hurricane Ida restricted the United States' oil supply from the Gulf of Mexico. Due to the fact that the platform operated by Shell will remain offline until the end of 2021, supply will not be restored to full capacity until early next year.

At the same time, OPEC+continues to maintain a tight market, increasing its total supply by only 400000 barrels per month. Last week, the Saudi Energy Minister basically ruled out the possibility of OPEC+increasing more supply than planned to cope with rising oil prices.

However, by the end of 2021, oil supply remained tight. In recent days, the key indicator of market tightening, namely the spot premium between the December 2021 Brent contract and the December 2022 contract, has jumped to over $8 per barrel. According to relevant data, this is the largest 12 months of Brent crude oil spot premium since 2013. Mitsubishi UFJ stated in its Oil Market Weekly last week that due to the energy crisis, $80 may only be the bottom of oil prices.