Brent Holds Above $70/bbl as Analysts Continue to Fret Over Post-2020 Oil Markets

Monday's mild losses were seen as a simple profit taking after last week's gains. File Image / Pixabay

Despite a round of profit taking after last week's gains, Brent still remained above the $70 mark on Monday with a showing of $70.20 per barrel, down 25 cents; West Texas Intermediate slipped 33 cents to settle at $65.55 per barrel.

The performance was remarkable only in that most share prices for energy companies and refiners in particular were up on Monday, with the S&P Energy Index up nearly 0.8 percent; otherwise, "I don't see anything extraordinarily bearish in the market today: I think some folks here are just...happy to take profits," said Bob Yawger, director of energy futures at Mizuho.

Gene McGillian, manager of market research at Tradition Energy, offered a slightly different take on the numbers: "The [oil] market is pulling back after pushing strongly high last week; I think the $70 level in Brent, $67 for WTI ... start to trigger worries of increased U.S. production levels."

As for geopolitical tensions, there was said to be an escalation on one front and an easing on another: supporting prices somewhat on Monday was Saudi Arabia air defences shooting down seven ballistic missiles fired by Yemen's Iran-aligned Houthi militia on Sunday, some of which targeted Riyadh.

On the other hand, global stocks, which have proven to be a significant influence on crude prices, came off six-week lows due to expectations that the U.S. and China will soon begin trade talks rather than undertake an all-out trade war.

However, if traders on this so-so Monday market were casting about for something different to worry about in the weeks and months to come, they had only to look at the latest market report from the International Energy Agency, which pointed out that that the oil industry only discovered 4 billion barrels of new resources last year, well short of the 36 billion barrels consumed globally in 2017.

This comes on the heels of the industry in 2016 finding the fewest barrels in 70 years; the IEA believes that while oil market will remain well supplied through at least 2020; after that, the market might struggle to meet growing demand.

Capping the bad news was the IEA's contention that investment spending was stagnant in 2017 and will only be 6 percent higher this year, thus mitigating the chances of boosting supplies after 2020.

Recently, Claudio Descalzi, chief executive of Italy's Eni, put a spin on the familiar worry over investment by stating that dwindling global supplies coupled with a lack of investment in new fields makes oil prices more susceptible to geopolitical strife: "In this context, any geopolitical event can create a price spike."