OPEC sees strong oil demand recovery: Paul Hickin, S&P

ET Now: We are seeing oil at a multiyear high given the fact that we are seeing a rapid pace of vaccination that is stoking hopes of a recovery kicking in, how do you see oil prices faring in the next couple months, it is obviously going to be a concern for India but for the rest of the world as we are seeing demand picking up, how do you see oil prices?
I think 70 dollars a barrel is the support level now for oil for a while, there is demand optimism even while this third wave and some problems with lockdowns and recoveries, it is not completely even but still there is demand recovery and we see with the EIA report today looking at 100 million barrels oil back in 2022. It has returned to pre Covid levels of demand which is really stoking the market’s optimism. Although, with one caveat, I would say–for the next couple of months we would like to see 70 dollars a barrel as a support and it might creep higher oil prices over that time but that is the level which starts to trigger OPEC plus group back on to the market and they have been very cautious of late, been very slow to bring on crude back on market, given that those demand concerns but you are going to see in the second half of the year a lot more OPEC plus crude coming back on to the market potentially a lot of Iran crude as well. Even at those oil prices, you might start seeing shale as well revive, it has been in a little bit of a doldrums, a little bit sleepwalking at the moment, but you could see shale as well revive in the last quarter of the year.

ET Now: We did see a lot of supply discipline coming in by the OPEC plus but once OPEC starts putting in more oil in the market, there is of course oil coming in from Iran as well, how do you think that is going to affect prices in the long term?
Yes, and it is going to put downward trend for oil prices –that extra crude is going to start plug in the gap and compliance has been very good, but OPEC plus has kept a lot of discipline for a long-long time now, it has been waiting for this light at the end of the tunnel and now it starts seeing that has emerged finally after a huge discipline last year especially, and you are going to see compliance waning and you could see it being back pump-at-will some point– if that demand recovery continues and that will continue to plug the gap and keep the market on an even queue.