Experts warn that the world oil price is about to reach a new peak, it is difficult to cool down

“At the current rate of consumption, we are still far from the record threshold when China has not recovered.” Energy Minister of the United Arab Emirates (UAE) Suhail Al Mazrouei said during the dialogue “Energy Futures Middle East and North Africa – Europe” taking place in Jordan on June 8.

Mazrouei predicted that oil prices will reach a new high when China’s demand can recover significantly and the efforts to increase output by the Organization of the Petroleum Exporting Countries (OPEC) and allied producers (OPEC+). can’t give quick results.

According to the UAE official, OPEC+ production is short of 2.6 million bpd compared to the target. Meanwhile, OPEC+ agreed to raise output increase in July and August 2022 to 648,000 bpd, from the previous monthly increase of 432,000 bpd, but still not enough for current demand.

World oil prices started to increase sharply since Russia launched a special military operation in Ukraine at the end of February. By the trading session on June 9, world oil prices increased by more than 2%, to the highest level of 13. last week.

Accordingly, the price of Brent crude oil increased by 3.01 USD, or 2.5%, to 122.12 USD/barrel. US WTI crude oil also increased to 122.11 USD/barrel, up 2.70 USD, or 2.3%.

According to Giovanni Staunovo, an analyst at UBS Investment Bank, despite the increase in crude oil production and other oil products, oil prices still face higher momentum due to the market’s expectation that Chinese import demand will increase. back this summer. Over the past several months, blockade orders in many major Chinese cities such as Shanghai and Beijing have curbed demand from the world’s largest oil importer. However, when the epidemic is under control and anti-epidemic measures are relaxed, this demand will soon increase again.

“If China’s demand increases sharply after the blockade and oil production in Russia continues to decline, the possibility of oil prices re-establishing the peak of 139 USD/barrel as at the beginning of the year is not excluded.” Matt Smith, an oil analyst for the Americas at Kpler.

This expert also predicts that oil prices will remain in the triple digits for a while longer.

Difficult to turn back

In a recent forecast, Goldman Sachs warned that it is likely that the price of Brent oil will average $135/barrel in the second half of this year and the first half of 2023. This figure is up $10/barrel from the bank’s previous forecast.

“We believe that oil prices need to move higher to normalize the very low level of global oil inventories, as well as OPEC’s oil reserves and global refining capacity.,” the Goldman Sachs report said.

Analysts at Morgan Stanley were even more pessimistic when forecasting crude oil prices could rise to $150 per barrel in the third quarter of this year.

Meanwhile, according to the US Energy Information Administration’s (EIA) forecast, the price of Brent oil will average USD 111.28/barrel in the third quarter and $104.97/barrel in the fourth quarter. 1 month, 2 corresponding forecasts that EIA made is 103.98 USD/barrel and 101.66 USD/barrel.

“We continue to forecast historically high energy prices due to the recovery economy and the effects of the Russo-Ukrainian war,” said EI Director Joe DeCarolis.

After a rough discussion, the EU in late May approved a ban on Russian oil as part of a sixth package of sanctions imposed on Moscow over the conflict in Ukraine. Accordingly, EU countries will have 6 months to cut imports of Russian oil and 8 months for other oil products.

For now, countries in the bloc can still buy Russian oil, but they must look for alternatives in the coming months. According to Kpler’s statistics, EU oil imports from Angola tripled, Brazil and Iraq increased by 50% and 40% respectively.

The search for alternatives in these remote places will push oil prices higher, said Roslan Khasawneh, fuel analyst at Vortexa. “Transportation costs increase because tankers have to travel longer distances, pushing oil prices higher.”he analyzed.

Governments have found ways to lower oil prices, such as subsidizing fuel prices and imposing ceilings on gasoline prices. But the most effective solution at this time is to increase the supply is very difficult.

In 2021, Russia produces 10 million barrels of oil per day, about 14% of global demand. Western sanctions against Russia create a huge vacuum in the market. According to the International Energy Organization (IEA), Russia’s oil production fell by nearly 1 million barrels per day. This could reach 3 million bpd in the second half of 2022.

The IEA forecasts that global oil production could increase by 3 million barrels per day to balance the gap left by Russia. However, Mr. Smith said that this scenario is unlikely to happen.

Since before the Russia-Ukraine conflict broke out, oil-producing countries have reduced investment in this field, turning to renewable energy. Total investment in oil and gas prospecting, exploration and production activities fell 23% to $341 billion in 2021.

Along with that, OPEC also has limits that are difficult to overcome. UBS strategist Giovanni Staunovo believes that many OPEC+ countries have already reached their production limit. This means the actual gain could be only half of the target.

Song Hy(synthetic)