After an OPEC+ meeting without surprises, oil prices are rising today as a result of the market confidence that the reported crude inventory decline created, and also due to the currently favorable exchange rate of other currencies against the US dollar.

Since Wednesday morning traders had a change of heart in pricing oil. Rumors drove prices up on speculation that OPEC+ could possible pause its planned monthly increase but then fell again just before the expected OPEC+ decision.

The weekly US storage level numbers then supported crude prices during US trading hours, offering support to Brent and leading WTI above $70.   

With the OPEC+ meeting now ticked off the list, traders are waiting for the next impetus to change expectations for the short-term recovery path of demand and supply.

The US oil industry is rushing to restore operations following Hurricane Ida. US refiners in Louisiana still have 1.7 million bpd crude processing capacity offline as of yesterday, of the initial 2.3 million bpd initial peak capacity outage.

The US GoM oil producers have also managed to restore 16% of the initial production losses according to BSEE yesterday, for a total outage of 80% vs. 96% at the peak.

The 1.4 million bpd of offline US GoM oil production, mostly medium-sour, will most likely be able to return more quickly than onshore refining capacity due to the power outages in Louisiana onshore.

As a result, prices for sour grades such as Mars and LatAm grades relative to WTI-like US onshore grades will see short-lived support until GoM production is fully restored.

The next price signal could come from the demand side, as the world continues to grapple with the Covid variants.

Rising cases in India have raised concerns for a third wave there, which could risk the demand recovery that is underway.

While the market, OPEC+ and most observers expect global oil demand to rise towards 99 million bpd by year-end, from currently 96-97 million bpd, a delay towards this recovery would put downwards pressure on prices and flip the supply-demand balance into slight surplus to year-end.

At the moment, the markets are sanguine and in a wait-and-see mode with limited mood to execute large price swings.