Original title: International oil prices hit a 7-year high: Omikron’s worries are gradually receding, and the smoke in the Middle East is rising once more
Although the new coronavirus Omicron strain is still raging around the world, market concerns regarding its possible impact on the global economy and crude oil demand have clearly subsided. While oil-producing countries are still trying to increase production, crude oil Expectations of strong demand have begun to dominate the market.
In addition to the basic supply and demand side, the situation in the important oil-producing countries Kazakhstan and Libya has eased recently, armed conflicts in the Middle East have resumed, and the situation in Russia and Ukraine has undergone new changes. The geopolitical crisis has begun to stir up the international crude oil market once more. .
With the combined effect of various factors, the international oil price has been rising continuously, and it has now reached a new high in the past seven years, and the US$90/barrel mark is close at hand. Many investment institutions boldly predicted that oil prices may reach $100/barrel, and the crude oil market is heating up once more.
Middle East war resumes
Since the outbreak of COVID-19 in early 2020, the development of the epidemic, the degree of economic recovery and the recovery of crude oil demand have become the most important factors affecting the crude oil market. In previous years, the geopolitical factors that easily affected the market ranked second.
Since the new year, the market’s concerns regarding the new crown epidemic Omicron strain have gradually subsided, and geopolitics has re-entered the market. In early January, the political turmoil in Kazakhstan and Libya once affected the local crude oil supply, boosting international oil prices in the short-term. After the situation between the two countries gradually subsided, the smoke of gunpowder in the Middle East reappeared, and the escalation of geopolitical risks added another fire to the crude oil market.
On January 17, local time, Yemen’s Houthi rebels launched a drone attack on Abu Dhabi, the capital of the United Arab Emirates, triggering an explosion and fire in a fuel tanker, causing many casualties. This became one of the largest attacks to date on the territory of the UAE. The Saudi-led coalition then launched airstrikes on the Yemeni capital.
The security risk of crude oil exports in the region has escalated once more. The United Arab Emirates is an important oil-producing country in the OPEC organization, and its crude oil production accounts for regarding 10% of the total share of OPEC, ranking third in the OPEC organization, and most of its crude oil production is used for export.
Affected by the risk of deteriorating security atmosphere in the Middle East, international oil prices continued to soar at high levels, setting a new high since October 2014.
As of the close on January 19, Beijing time, the price of New York WTI crude oil futures for February delivery rose 1.92% to close at $85.43 per barrel; the price of London Brent crude oil futures for March delivery rose 1.68% to close at $87.51 /bucket.
Jinlianchuang crude oil analyst Xi Jiarui pointed out that due to Iran’s long-term support for the Houthis in Yemen, the attack in the United Arab Emirates also pointed to Iran. The attack may affect the recent diplomatic efforts to ease tensions in the Persian Gulf region, and will also Affect the Iranian nuclear negotiation process.
Rystad Energy analyst Louise Dickson said the damage to Abu Dhabi’s oil facilities by Yemen’s Houthi attacks was not severe, but might raise concerns regarding supply disruptions in 2022. At the same time, the increase in political risks in the Middle East may directly affect the nuclear negotiations between the United States and Iran, and the possibility of Iranian crude oil entering the market has weakened once more, which may boost the demand for similar crude oil products in other regions.
Multiple variables boost oil prices
In 2014, the outbreak of shale oil hit the global crude oil market hard, and oil prices have been in a stage of slow recovery since then. The epidemic in early 2020 drove oil prices to the bottom once more, but just two years later, the rapid recovery of oil prices has exceeded everyone’s expectations.
As of the evening of January 19, Beijing time, the price of Brent crude oil had exceeded US$88.5/barrel, just one step away from the high of US$90/barrel, and the price of WTI crude oil futures was also hovering around US$86/barrel.
In addition to the problems in the Middle East, tensions between Ukraine and Russia continue to affect the European gas market, and crude oil as an alternative energy source is not immune to it. In addition to geopolitics, the idle crude oil production capacity of oil-producing countries seems to be stretched, and the market’s expectations for tighter crude oil supply and demand continue.
Since November 2021, political tensions between Russia and Ukraine have continued to escalate, bringing new potential variables to international oil prices.
Last week, Russia held a series of security dialogue meetings with the United States and European countries in an attempt to de-escalate the situation in Ukraine, but ultimately came to nothing. Europe and the United States hope to use the Nord Stream 2 natural gas pipeline as a weight to put pressure on Russia, but this will further lead to the deterioration of the natural gas supply and demand situation in Europe.
Since the third quarter of last year, extreme weather and insufficient local renewable energy power generation have led to a continuous increase in the demand for natural gas in Europe. Under the circumstance of limited increase in natural gas supply, the price of natural gas in Europe has continued to hit record highs, and both local electricity and natural gas supplies have been strained. Case. The natural gas crisis in Europe once led to an increase in the price of alternative energy crude oil, which once rose by as much as 20% in a single month.
If the situation in Russia and Ukraine continues to heat up, market transactions may continue to be long on oil prices. The rise in European and American crude oil futures may exceed previous market expectations and hit the $90/barrel mark ahead of schedule.
Goldman Sachs analysts boldly predicted in a report that by summer, OECD crude oil inventories will fall to their lowest levels since 2000, while OPEC+ crude oil production capacity will fall to a record low. Therefore, in the first quarter of 2022, Brent oil prices may rise to $90/barrel, rush to $95/barrel in the second quarter, and reach $100/barrel in the third and fourth quarters.
But the high oil price also has the risk of falling back. Goldman Sachs analysts said that due to the huge reserves of shale oil and the flexibility of its production, further gains in oil prices will be limited, and international oil prices will not exceed $100 per barrel.
Xi Jiarui pointed out that the European and American central banks may increase the intensity of interest rate hikes. Once the monetary tightening policy is implemented, the funds invested in financial derivatives will also be reduced, which will also curb the rise in oil prices.
(Author: Peng Qiang Editor: Zhang Weixian)
