Trading firm Mercuria's chief executive Marco Dunand said today that crude prices are likely to stay at about $70/bl "for a while", as Opec+ will use some of its spare capacity and boost production if prices top $75/bl in order to avoid triggering a new jump in shale output.
On the demand side, Dunand sees global consumption increasing to above 100mn b/d by the end of the year, "a little bit short" of pre-pandemic levels and compared with around 95mn b/d now.
On the supply side, there will be around 6mn b/d of spare crude capacity available by the end of this year, excluding Iran and Venezuela, Dunand told the FT Commodities Global Summit. This will be sufficient to prevent a "major spike in prices next year," he said "unless Opec+ want the market to be substantially higher."
US shale production will increase by around 300,000 b/d this year and by around 1mn b/d in 2022, but the market should be able to absorb this, Dunand said. He also said that there is a wide range of longer-term price scenarios — "bigger than I have ever seen before" — including crude hitting $100/bl or falling below $50/bl. A lot will depend on policy decisions, such as the Cop 26 UN climate conference in Glasgow this year, Dunand said.
