Price Of Oil

Price Of Oil – LONDON, March 2 () – The rise in Brent oil prices is following the same path as in 2007-08, when it reached $150 a barrel. barrel before the destruction of demand and price collapse in the recession, a study by Mitsubishi UFJ Financial Group (MUFG).

Brent crude hit $113.02 on Wednesday, the highest since June 2014, as fears grew of supply disruptions following tough sanctions on Russian banks in response to the conflict in Ukraine.

Price Of Oil

“Oil prices have become so decoupled from supply prices – due to the lack of oil – that they are getting to the level where they are destroying demand,” said Ehsan Khoman, head of emerging markets research, MUFG.

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“Supply shortages are playing out in the oil market today, which is ahead of today’s geopolitics – the Russia-Ukraine (crisis) is just hitting the current oversupply shortage.”

A release of 60 million barrels of oil from strategic reserves by member countries of the International Energy Agency (IEA) was agreed on Tuesday, but failed to stabilize prices.

Oil supplies in the developed world have been falling steadily in recent months amid a rebound in strong demand following the pandemic.

Meanwhile, near-term global production capacity is falling as the Organization of the Petroleum Exporting Countries (OPEC) and allies led by Russia have increased their targets. Oil prices rose above $80 (£59). a barrel on Tuesday, hitting its highest level in three years as the pound weakened.

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Brent crude, the international benchmark, rose to $80.69 on the day, the highest since October 2018.

Investment bank Goldman Sachs said Brent could reach $90 a barrel. barrel by the end of the year, and warned that rising input costs, higher gas prices and weak growth could dampen European profit growth for 2021.

“As growth accelerates, it will be harder for companies to book higher input costs, which is the biggest risk to earnings margins,” Wall Street lenders said.

It came as the pound suffered its biggest one-day fall against the dollar on Tuesday, falling 1.3% to below $1.3530 despite fears of rising inflation. It was the lowest since January as investors sought the safe haven of the dollar.

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Stock markets were also lower, with European indexes in the red and shares on Wall Street also fell.

Brent crude, on the other hand, is up about 55% for the year to date. West Texas Intermediate (WTI) rose to around $75 a barrel. barrel.

Oil prices fell at the beginning of the epidemic. Last April, they fell below zero for the first time in history as they canceled requests for a shutdown while producers continued to pump oil from wells.

Global oil supplies were also affected by hurricanes Ida and Nicholas, which passed through the Gulf of Mexico and damaged US oil infrastructure.

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Rising natural gas prices have also made oil a cheaper option for power generation, increasing demand.

The world’s largest independent oil trader, Vitol Group, said it expected global oil demand to rise by 500,000 barrels a day this winter.

“Similarly, India, the second-largest oil importer, increased its oil imports to a three-month high in August as refiners begin building inventories as they face higher demand,” said Naeem Aslam, chief market analyst at Think Markets.

The OPEC group also said there would be an increase in demand, but expected it to be slightly lower, about 370,000 barrels a day more.

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During the pandemic, several members of the Opec+ producer group, which includes ally Russia and several other countries, cut production and began to have trouble meeting requests for recovery.

In the UK, motorists are struggling with fuel prices hitting their highest level for eight years, the RAC said, driven by a shortage of drivers in the country.

Oil prices are directly linked to the wholesale price of oil because crude oil is used to produce petrol and diesel.

“With oil prices rising and now near three-year highs, wholesale prices have been forced up, meaning retailers are paying more than they were a few days ago for the same fuel,” he said. attacked Ukraine last spring, energy experts predicted oil prices could reach $200 a barrel, a price that would send shipping and transportation costs into the stratosphere and bring the global economy to its knees.

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Today, the price of oil is lower than when the war started because it has fallen by more than 30 percent in just two months. On Monday, news of the slowdown in the Chinese economy and the drop in Chinese interest rates pushed the price below $90 per barrel. barrel for the American brand.

Petrol prices have fallen every day for the past nine weeks, with the national average below $4, and the price of diesel and petrol is also falling. This would eventually translate into the cost of various things such as food and plane tickets.

But the celebration may be premature. Energy prices can rise just as easily as they can fall suddenly, unexpectedly and suddenly.

China, where the Covid-19 lockdown is still spreading, will reopen its cities to more trade and traffic, boosting demand. The withdrawal of oil from the US Strategic Petroleum Reserve ends in November, and it must be replenished. And a single unexpected event – e.g. a hurricane that floods the Houston Ship Channel and drives oil refineries out of the Gulf of Mexico for weeks or months — could send oil prices skyrocketing.

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Such a disaster could send ripples through the US economy and the world because the price of energy is the basis for the price of everything that is shipped and produced, whether it is rice or building materials.

“Oil prices can always be dramatic,” said Daniel Yergin, an energy historian and author of “The New Map: Energy, Climate and the Clash of Nations.”

Prices could fall further if Iran agrees to a new nuclear law after backing down on demands to remove the Islamic Revolutionary Guard Corps from the US terror list, opening at least one potential drain on a million barrels a day of Iranian oil exports. .

In addition, the prospect of higher interest rates has led many investors and economists to predict a recession — and a drop in demand — even as unemployment remains low and profits remain strong. .

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“I think the price of oil is likely to come down,” said Sarah Emerson, president of ESAI Energy, a research firm. “We have a number of factors that come together: We have China reducing crude oil imports in the third quarter, we have the end of the summer gasoline season, we have concerns about the slowdown in the economy, and it is true that there is a a lot of supply.”

But he quickly added: “That doesn’t mean prices won’t go up,” which marks the end of the withdrawal of strategic reserves – which the US, in cooperation with other countries, has since released a million barrels a day – and the possibility that Europe will switch from burning oil to natural gas in the face of a cold winter.

The price of fuel, which consumers see go up and down every day at the corner gas station, plays a big role in an economic perspective. “The price of oil is not that big,” said Mark Finley, an energy economist at Rice University, “but in terms of its impact on consumer confidence, it seems to represent how you feel about the world in general.”

About 3.5 percent of Americans’ personal consumption is devoted to gasoline, according to a June report from RBC Capital Markets. Low-income and farm workers who own older, less fuel-efficient cars and commute long distances are most affected by higher fuel prices.

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Gasoline prices have too much of an effect on consumer sentiment because they are visible at every gas station.

In general, fuel prices are less important than they used to be because people drive more efficiently and work from home. But the more people spend on petrol or diesel, the more they have to spend on everything else.

When oil prices fall, there are more expenses for industry and agriculture, including chemicals and fertilizers. And shipping will be more economical. But when they rise significantly, as they did in 2008 and in the 1970s, they tend to drive up other prices and dampen the overall economy. And often political fallout.

Predicting energy prices is always a fool’s errand due to many factors, including traders’ expectations of buying and selling oil, the political fortunes of volatile producing countries such as Venezuela, Nigeria and Libya, and public and private decisions about oil investments. company manager.

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“(When) will the oil bulls begin to reverse the downtrend?” was the headline of a recent Citigroup commodities report. With a global recession “on the horizon”,

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