For several weeks now, the price of Brent and WTI crude oil futures has been gradually reaching those indicators that we have not seen in the last twelve months. Let’s find out what is happening in the commodity market and what events have such a positive effect on the price tag of black gold.
What’s going on with oil prices?
According to the data on trading on the London stock exchange ICE, today, February 17, at the time of preparation of the material, the April futures for Brent crude rose to $ 64 per barrel, showing an increase of 1.03%. March futures for WTI crude added 0.78% in price, reaching the level of $ 60.52.
It is important to note that black gold has not been able to boast such a value since mid-January last year.
What are the reasons for the rise in prices?
- Due to record frosts, power plant disruptions in Texas have closed all oil refineries. Recall that this state has 31 refineries with a total daily production of 4.6 million barrels.
- The rise in oil prices was influenced by market concerns about delays in fuel supplies from Saudi Arabia. The excitement was caused by information that the Yemeni Houthis attacked the airport in the Kingdom.
- The global cancer vaccination program is gaining momentum, which also has a positive effect on the oil market, inspiring optimism for investors.
- Let’s not forget about the program to stimulate the US economy proposed by Joe Biden and already approved by the Senate. This plan provides for the allocation of $ 1.9 trillion to support citizens and businesses. Such news pushes commodity quotes up.
- The OPEC + countries are impressive with their discipline and dedication to the agreements. It is very important that an agreement to contain production is maintained. Moreover, since February 1, oil production in Saudi Arabia has been further reduced by 1 million barrels.
- As a result of the efforts of OPEC +, the world reserves of black gold are decreasing. For example, in the United States, the current volume of inventories is only 4% higher than the average for the last 60 months.
What’s next for oil prices?
The International Energy Agency (IEA) believes that the opportunity to increase the production of raw materials from OPEC + will appear in the second semester of this year. This, of course, will pull the price of oil futures down.
It is also curious that the IEA forecasts growth not only in supply, but also in demand. The agency’s analysts suggest that this year, countries that are not part of OPEC + will increase production by 830 thousand barrels per day. At the same time, global daily demand will amount to 94 million barrels, which is 60% of the pre-pandemic volume.
Experts from JPMorgan Chase, in turn, announce the onset of a new super cycle of growth in the commodity market, the fifth in the last hundred years. This time it is caused by the fact that market participants are hedging inflation, being confident in the impressive pace of the global economic recovery after the coronavirus pandemic.
JPMorgan Chase predicts that in the fourth quarter of 2021 the price of Brent black gold will increase to $ 68, Goldman Sachs – up to $ 65, and Citigroup – generally up to $ 70.
In which country will the demand for oil increase?
Guess which country will drive demand in the coming decades. If you thought about India, you were damn right. Well, at least the IEA analysts have respectfully shook their heads at you.
In their opinion, India will increase oil demand to 8.7 million barrels per day by 2040. Recall that in 2019 this figure did not exceed 5 million barrels. About $ 225 billion a year will be allocated for the purchase of foreign raw materials, which is three times more than the pre-pandemic statistics.
As for our own refineries, their capacity in twenty years will amount to almost 8 million barrels per day. However, the domestic product will cover only 8% of the required volume.
Summing up the result
Compliance with the agreements by OPEC + countries, a decrease in world reserves, a stimulus program for the American economy, global vaccinations, as well as record frosts in the United States provoked an increase in the cost of futures for Brent and WTI crude oil.
Experts believe that the positive trend will continue and in the fourth quarter of this year, prices will be able to reach $ 70 per barrel. Do you share such bold optimism?