The week of galloping oil price

According to the data of Trading Economics On May 27 (Vietnam time), the price of WTI oil sometimes approached the threshold of 115 USD/bin. Thus, compared to the weekly low (108 USD/barrel on May 24), the price has increased by more than 5%.

Meanwhile, the price of Brent oil reached 118.5 USD/barrel, then adjusted down slightly to 117.14 USD/bin. Compared to the lows of the past week (111.7 USD/barrel on May 24), the international standard oil price has increased by nearly 5%.

Prices for both oils hit their highest levels since early March. Tell Zinginternational experts believe that the main driving force is the possibility of a tight market due to high gasoline consumption in the US in the summer, and the risk of the European Union (EU) banning Russian oil.

Despite continuous ups and downs in the past week, WTI oil price still recorded a strong increase. The main reason is concerns about shortages in the US market. Image: Trading Economics.

Many factors drive oil prices

“Oil prices rose to their highest levels since late March, boosted by fresh news on US oil inventories“, Giovanni Staunovo – analyst at UBS – commented.

Talk to ZingMr. Jeffrey Halley – analyst at Asia Pacific OANDA (based in Singapore) – said that oil prices increased sharply as the market continued to worry about shortages in the US market.

According to the US Energy Information Administration, US gasoline stocks fell 482,000 barrels last week to 219.7 million barrels. Gasoline consumption usually goes up during the summer, which is the peak driving season in the country.

“Driving season in the US and strong demand for transportation will push prices up. Because supply cannot keep up with demand, the oil market is still in a state of shortage“, commented Mr. Staunovo.

“The news that US President Joe Biden was working with the oil industry to investigate the restart of refineries did not have much impact on the market.“, Mr. Halley commented.

Because according to him, this cannot have an immediate impact on US oil production.

Oil prices also rose as the European Commission continued to seek support from 27 member states for a plan to embargo Russian oil. On May 25, European Council President Charles Michel said he was confident the bloc could reach an agreement before its next meeting on May 30.

“The decrease in actual supply, along with more and more countries refusing to supply oil from Russia, will cause gasoline prices to increase significantly.“, Mr. Clifford Bennett – home economy Chief of ACY Securities – warning.

Since the beginning of the year, prices have increased by about 50%.

“It seems that the only thing that can cause oil prices to plunge is demand in major economies. But this is unlikely to happen“, Mr. Edward Moya – senior market analyst at The Americas OANDA – commented with Zing.

Uptrend can last

“The news that OPEC+ rejected Western calls to rapidly increase production to cool down oil prices also contributed to the oil market rally.“, explains expert Halley.

He said that after the price of Brent oil crossed an important level, 116 USD/barrel, next resistance could be 120 USD/bin. The sharp increase in the price of Brent oil is also likely to pull the price of WTI oil to the 115-116 USD/bin.

Follow ReutersOPEC+ (Organization of the Petroleum Exporting Countries and Allies) will stick to an agreement on raising oil production made last year, and reject Western calls to boost output.

Western countries have repeatedly asked this group to increase production. But OPEC+ thinks the oil market is in balance. The price rally this year has nothing to do with fundamentals.

Brent oil price surged close to the threshold 119 USD/barrel, marking the highest level since early March. Photo: Trading Economics.

Under the agreement reached in July last year, OPEC + agreed to maintain the policy of increasing production at 400,000 bpd. By June this year, the target to increase production is only 432,000 bpd, even as oil prices skyrocket this year.

In fact, the group’s oil production has plummeted as many customers shun oil Russia, Nigeria and Angola also produce too little compared to the target.

In April, OPEC+ produced 2.6 million bpd below its target, with Russia accounting for 50% of the shortfall. According to Russian Deputy Prime Minister Alexander Novak, oil and gas condensate production in the country is expected to decrease by more than 8% to 480-500 million tons this year.

Russia is also promoting oil sales to China and India, as oil trading with Europe – Moscow’s major customer – becomes more difficult.