Oil market entering ‘supply anxiety’ regime

Disruption in natural gas markets has brought forward a “supply anxiety” regime for the oil market, which will result in a sharp focus on OPEC+ spare capacity and US upstream investment dynamics going forwards. We expect prices to be biased higher until the market sees concrete evidence of meaningful short-cycle upstream investment. However, with tight oil stakeholders no longer willing to subsidise oil prices via capital destruction, the cost of the marginal short-cycle barrel is biased higher.