The American and Chinese roller coaster: why oil prices are in a fever

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, commented to Forbes on the possible causes of price "swings" in the global oil market.

Alexey Gromov does not consider the latest price increase to be the beginning of a long-term trend, believing that there is only a correction after a too sharp drop.

"Prices sagged a lot, and then a set of short—term factors emerged — a hurricane and events in Libya, which slightly shifted the bearish market sentiment. Libya is definitely a short—term story. I think the situation there will be resolved and Libya's production and exports will recover within the next month", the expert explains.

GDP growth in China this year will not reach 5%, which is a rather weak indicator by Chinese standards, Gromov notes.

"This is very serious for the oil market, because China, along with the United States, is the largest consumer of oil," he says. — Weak indicators of the Chinese economy have formed negative expectations. Against this background, an increase in supply was also expected, in particular from the United States."

Gromov explains the lack of reaction to the OPEC+'s decision to postpone the gradual abolition of voluntary cuts by the current oil surplus on the market.

"In addition, there is another factor that OPEC+ is struggling with, which is the discipline of the implementation by the OPEC+ countries of the voluntary restrictions they have assumed," the analyst adds. "If the OPEC+ members declare that they will reduce production by a certain amount, but in fact they do not, then the market naturally begins to react accordingly."