The Week In Hindsight, 11 April 2014

Both WTI and Brent crude gained over the week until Friday as research by the International Energy Agency showed OPEC output contracting by close to a million barrels per day over March, which is a far greater deficit against expectations than was expected by the market.

In addition to revelations of reduced output, the agency also announced that OPEC would need to increase output past its ordinary rate of production over the coming year in order to meet an anticipated rise in demand, indicating that the potential exists for undersupply to continue to impact upon prices over the near to medium term.

The report came just as tensions over Ukraine began to ratchet up again, with separatists in the eastern region of the country calling for a referendum similar to that which took place in Crimea. This is while the supply line from Libya remained disrupted over March with the nation, according to Bloomberg data, producing at a rate of just 10% of its maximum capacity.

Despite lower production over the past year, four of the North African nation’s major ports are expected to come back on-line later next week which should help the Libyan economy however, it is unclear just how much of an impact it is likely to have upon the supply and demand gap anticipated by the IEA.

For these reasons, we continue to expect support for prices at or above $100 and $105 per barrel for both WTI and Brent Crude respectively.