HomeMediaLatest NewsTo count to a hundred: why oil continues to rise in price

To count to a hundred: why oil continues to rise in price

08 February 2022

Salikhov Marcel R. President, Principal Director on Economic Studies, Head of the Economic Department

Marcel Salikhov, President of the Institute for Energy and Finance Foundation, commented to the Izvestia newspaper on the situation on the world oil market.

The lack of investment is still more of a long-term factor influencing the market. Right now, slightly different forces are to blame for rising prices, primarily rush demand. According to Marcel Salikhov, the main reasons for the increase in oil prices since the end of last year were due to the fact that fears about the impact of the Omicron strain were not backed up by an actual impact on demand. The decline in prices in November 2021 was due to this factor. However, the main countries - large consumers of oil - did not begin to tighten quarantine restrictions.

— On the supply side, the OPEC+ countries adhere to the agreements that were agreed back in August: an increase in production by 400,000 barrels per day per month, but the final increase turned out to be within 250,000 barrels per day. This means a nominal increase in quotas, which does not lead to an increase in supply to the world market. Geopolitical factors related to instability around Ukraine, as well as the possible imposition of new sanctions against Russia, also contributed to higher prices at the beginning of the year.

He added that in recent days, heavy snowfall in Texas and other southern US states has raised concerns about what could affect production in the Permian Basin, the largest source of shale oil.

Salikhov believes that $100 per barrel is a quite realistic price already in the first quarter, at least the market strives to reach this level, and the seasonal rise in demand increases the scarcity of the resource. But then the situation may change.

-However, starting from the second quarter, the opposite situation will be observed — a seasonal decrease in demand in the face of increasing supply. We expect this to stabilize prices and lead to lower prices in the second half of the year. Oil prices at $90-100 per barrel are not sustainable in the long run.

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