“Oil has entered 2022 very poorly. The market is seriously feverish due to geopolitics"

Alexey Gromov, Principal Director on Energy Studies and Sergey Kondratiev, Deputy Head of the Economic Department of the Institute for Energy and Finance, commented to Gazeta.Ru on the current situation on the world oil market.

The US aggressive rhetoric

According to Sergei Kondratiev, the effect of the words of US senators about anti-Russian sanctions will be insignificant in any case. Only real measures against the energy sector can truly excite the world commodity market.

“The United States, unlike Japan and China, is much less dependent on oil imports. Therefore, even an increase in the price of raw materials to $88 per barrel allows American politicians to threaten Russia with a cutoff from SWIFT and sanctions against major banks. The geopolitical factor is rather short-term,” the expert noted.

According to Alexey Gromov, it is the development of the global geopolitical situation that will determine price fluctuations on exchange resource sites.

“Oil has entered 2022 very poorly. Due to geopolitics, the market is seriously in a fever. If the conflict in eastern Ukraine flares up with renewed vigor in the near future, with a high degree of probability, stock quotes may well jump over the $100 per barrel mark,” Gromov explained.

The US shale failure and Iran's oil problem

“The US shale industry is not currently showing historical records in its development. The expectations of many investors were deceived. Plus, the unpacking of 50 million barrels from strategic reserves dragged on for months in advance, which also does not contribute to an increase in supply on the global market," Gromov stressed.

In turn, Kondratiev, in an interview with Gazeta.Ru, named the failure in the negotiations of the leading world powers on Iran's nuclear program as one of the key reasons for the record growth in stock prices for oil. In the event of a compromise, the global supply of oil could increase significantly, but instead, the growing demand for raw materials still exceeds free volumes of oil.

“Tehran, being under tough international sanctions, is forced to illegally sell oil to foreign contractors. If the December negotiations were successful, Iran could supply 1 million barrels per day to the world market in the first half of 2022, and already 2 million in the second half of the year,” the expert explained.

How will OPEC behave?

According to Gromov, in the current situation, only a two-fold increase in monthly production by OPEC+ countries by 800,000 barrels per day could return oil prices to an acceptable level. However, OPEC+ countries currently have different capacities.

“For some OPEC+ countries, changing their oil production strategy is a painful and difficult issue. The same Russia in the second half of 2021 did not pull its own production quota. This is not at all due to the fact that Moscow did not want to fulfill its obligations under the deal, wanting to maintain high oil prices, but due to limited technical capabilities to increase production,” Gromov emphasized.