WTI surpassed $75 a barrel for the first time in three yea+8rs since 2018. While the economy is showing signs of resuming after the covid-19 pandemic, the demand for oil prices also rebounded as consumer sentiment revived ahead of the summer vacation season.
In the New York Mercantile Exchange (NYMEX) Wednesday, WTI prices rose 2.40 percent to $75.23 a barrel. This is the highest level since October 2018.
In addition, the price of Brent crude is trading at $75.84 on the ICE Futures Exchange in London, up 1.63 percent from the previous day, as of 6:00 a.m. GMT+8 on the 2nd.
The reason for the rise in oil prices is interpreted as reflecting expectations that demand for aviation oil and gasoline will increase significantly due to the recovery of travel demand, which had been stagnant in the aftermath of covid-19.
Earlier this year, the price of WTI started at 48.5 dollars per barrel and has risen by more than 50 percent so far.
In addition, major oil-producing countries are expected to push for easing production cuts instead of expanding the scope of increase, further fueling the rise in oil prices.
OPEC+’s forecast increase in production due to production cuts is 400,000 barrels per day from August to December this year-December.
However, some point out that such an increase in production is not enough to solve the supply shortage at a time when the demand for crude oil is expected to rebound ahead of the summer vacation season.
“OPEC’s increase in production is not enough to calm oil prices,” said Jeff Curry, an analyst at the raw material market at Goldman Sachs. “As of last month, 2.3 million barrels of crude oil were lacking every day.”
Some predict that oil prices could soar to $100 a barrel as supply fails to keep up with demand. Bank of America (BoA) predicted in a report early last month that oil prices could surpass $100 a barrel by next year.
Meanwhile, the OPEC+ meeting scheduled for the 1st was extended by one day due to disagreements among member states. Bloomberg reported that the United Arab Emirates (UAE) opposed the 400,000-barrel increase plan on the 1st, delaying the final discussion to decide on the oil supply policy.
According to major foreign media, the UAE, which claims to increase production, calls for OPEC+ to raise output standards that are the basis for oil production cuts. As output standards rise, oil production cuts will be eased further.
However, there are also concerns that the problem of oversupply of crude oil may occur in the mid- to long-term. With the spread of the delta mutation virus, lockdown measures could resume and this could bring down demand for crude oil again.
The Joint Technology Committee (JTC), a market outlook organization within OPEC+, said on the 29th that risks from oversupply could arise in 2022 and cited the spread of delta mutations and polarization of economic recovery rates by countries as the main factors.
Also, the ongoing discussion between the U.S. and Iran over the restoration of the Iran nuclear agreement is expected to be a variable. If the negotiations are concluded early, Iran’s oil supply is likely to increase sharply due to increased oil production and increased exports.
