Oil prices have returned to what they were in the early days of the Ukraine war, raising the question of whether they will fall again. Or will it remain constant? Or it will increase further, but analysts do not expect consumers to receive good news anytime soon.
Brent crude jumped to more than $ 124 a barrel earlier this week after the European Union announced it would cut 90 percent of Russia’s oil imports by the end of this year.
Prices fell slightly to $ 117 after the OPEC Plus countries decided to increase production by 648,000 barrels per day in July and August.
Despite OPEC Plus countries agreeing to accelerate production growth over the next two months, oil futures rose again to more than $ 120 on Monday after Saudi Arabia raised its crude oil sales price in July. short supply
According to Reuters, on Monday, Citibank and Barclays increased their forecasts for crude oil prices for the current and future years due to the lack of Russian supply and delays in the return of Iranian oil to the market.
CNN quoted Matt Kepler, an Kepler oil price analyst, as saying that oil prices are likely to remain stable above $ 100.
“If China’s demand strengthens again after the shutdown and Russia continues to see production decline, the $ 139 a barrel of oil we saw at the beginning of the war with Ukraine will not be out of reach,” he said.
And CNN identified three reasons to expect a significant drop in oil prices.
The European Union (EU) on Friday formally approved an oil embargo as part of a sixth package of sanctions against Moscow over its invasion of Ukraine.
Russia imports crude oil by tanker within six months and petroleum products within eight months.
“The risk is that sanctions could lead to a tense situation in oil markets, rising prices and, consequently, rising Russian incomes for several months,” the Bruegel European Research Center warned.
Despite high inflation and slower growth, global oil demand is unlikely to fall enough to drive down prices, as it did in 2008.
“EU countries are likely to continue to buy oil from Russia for the time being, but they are looking for alternative suppliers,” Smith said.
According to Kepler, crude oil imports from Angola have tripled since the start of the war, while Brazil and Iraq have increased by 50 and 40 percent, respectively.
Iraq also announced on Friday that it plans to increase production to 4.58 million barrels per day in July.
But Europe’s access to oil from distant alternatives means that “prices will remain high,” said Raslan Khasavoneh, a senior analyst at Fortexa Energy Data Company.
And global analysis shows that “governments can take steps to reduce prices for consumers, including providing subsidies, pricing at gas stations, but the magic solution that the world needs to reduce prices is so large that it is difficult to Is available. it.”
According to the International Energy Agency, Russia accounted for 14 percent of global oil supplies last year, which means that Western sanctions against Russia have already created a huge gap in the market.
It is widely believed that OPEC Plus’ decision to push ahead with production increases is unlikely to meet demand, as the allocation will be distributed to all members, including Russia, which faces sanctions.
The International Energy Agency also believes that global oil production should increase by more than 3 million barrels per day by the end of the year to offset the impact of sanctions.
But Smith says this can be difficult to achieve because “even before the war in Ukraine, oil producers were turning to renewable energy to reduce their investment in production. OPEC has its limitations.”
Severe quarantines due to the corona epidemic in Shanghai, Beijing and other major Chinese cities have reduced demand for the world’s largest oil importer, but prices have risen at the time.
As the Chinese government begins to lift these restrictions, stalled demand may push up prices, even if it can get oil from its neighbor Russia at a discount of $ 34 a barrel.
Vortexa estimates that China imported 1.1 million barrels a day of Russian oil by sea in May, about 37 percent more than last year.
However, due to its gradual deregulation approach, China is likely to increase its demand for oil over time, which means that prices will not fall.
Despite inflation and high gasoline prices, demand for fuel in the United States has declined only slightly.
According to Opis, a company that tracks gasoline prices and consumption data, last week, the amount of gasoline pumped to US gas stations fell by only five percent compared to the same week last year.
Source: Lebanon Debate
