Behind the global energy watch | international oil prices soaring: Olmi kerong is just a "paper tiger", and supply is in short supply as the trend of the times?

21st Century Business Herald reporter Wu Bin Shanghai report At a time of strong demand and frequent supply problems, international oil prices have once again shown amazing explosive power.

The global supply of crude oil is already tightening, coupled with the Middle East geopolitics and the stimulation of the explosion news of the oil pipeline, Brent crude oil futures once stood at $89 / barrel on the 19th, hitting a new high of more than 7 years, and the US WTI crude oil futures also stabilized above $85 / barrel.

Wang Chengqiang, director of the New Era Futures Research Institute, told the 21st Century Business Herald that international crude oil has rebounded by more than 30% in the past month and has risen to a new high in more than seven years. High oil prices have caused inflation problems, and Western countries have released strategic oil reserves and plans to accelerate the tightening of monetary policy, all intended to curb the excessive rise of crude oil, but it is difficult to reverse the upward trend of crude oil.

Omikeron has a limited impact on demand

Although the Omikejung variant virus once caused oil prices to plummet, it eventually proved to be just a "paper tiger".

The International Energy Agency (IEA) said in its monthly report released on January 19 that the Omikeron variant virus was unexpected and had little impact on demand, while the crude oil market experienced supply disruptions and the oil market seemed to be tighter than previously expected.

Specifically, the IEA raised its global daily oil demand forecasts for 2021 and 2022 by 200,000 barrels, and expects daily consumption to increase by 5.5 million barrels and 3.3 million barrels, respectively.

The IEA also highlighted supply risks in its monthly report, with OPEC+ struggling to restore production and some crude oil producing countries experiencing a series of factors. As OPEC+ tries to ramp up production, spare capacity will be further reduced, possibly from the current around 5 million barrels per day to 3 million barrels per day.

Echoing this, OPEC also said in its monthly report released on the 18th that it still adheres to the forecast of strong growth in global oil demand in 2022, and it is expected that the oil market will still be "well supported" this year.

Specifically, OPEC expects global oil demand to increase by 4.15 million bpd in 2022, unchanged from last month's forecast. Oil consumption in the third quarter will exceed the 100 million bpd mark, also in line with last month's estimates.

OPEC also stressed that a possible rate hike in 2022 will dampen inflation, which some believe will pose a risk to oil demand, but in fact it is unlikely to weaken the demand outlook. Even as central banks tighten monetary policy, the market's strength will continue, with oil inventories significantly below the five-year average. "Monetary policy action is not expected to hinder potential global economic growth momentum, but rather help to readjust economies that are likely to overheat."

It should be noted that the recent rise in oil prices will undoubtedly damage Biden's support rate again, and the US government is not expected to sit idly by and ignore the rise in oil prices. Rising gasoline prices have been a major factor in soaring inflation during Biden's presidency, democrats have become more difficult to maintain their majority in both houses in the November midterm elections, and the White House is now doing everything in its power to reduce gasoline costs.

EMILY Horne, a spokeswoman for the National Security Council, said in a statement on the 18th that the White House plans to continue to monitor energy prices in the context of global economic growth, and will hold consultations with OPEC+ countries if necessary.

In the future, oil prices may still have room to rise

At a time when global crude oil demand is strong, the supply side is facing huge pressure, which also means that oil prices may still have room to rise in the future.

After the 2020 outbreak, OPEC+ cut supply by a record 10 million bpd, equivalent to 10% of global demand. Then, as demand recovered, OPEC+ decided to gradually reduce the scale of production cuts, setting a target of 400,000 barrels per day of production increase. OPEC+ met on January 4 and agreed to increase its production target by another 400,000 bpd in February.

But in fact, OPEC has not really increased production as planned, and countries such as Nigeria cannot increase production as planned. According to the OPEC monthly report, OPEC member countries increased production by only 166,000 barrels per day in December last year, far below the production increase target of 250,000 barrels.

Worse still, unexpected events have also put crude oil supplies at risk. Yemen's Houthi militant group this week attacked the UAE capital, Abu Dhabi, OPEC's third-largest oil producer. In addition, an explosion occurred on the 18th in an important oil pipeline from Iraq to turkey's Mediterranean port. These contingencies have exacerbated supply concerns.

Wang Chengqiang analyzed to reporters that the recent Houthi attack on THE UAE oil facilities, as well as the explosion and fire of the oil pipeline in southeast Turkey, although the overall impact on supply is not large, but geopolitical risks have caused the crude oil market to be on guard. In addition, the grim situation in Russia and Ukraine has also tightened the nerves of the market.

Joe Perry, a senior analyst at Jia Sheng Group, also told reporters that although the attack did not affect the crude oil production of the UAE, the Houthi armed forces may carry out the attack again, and the market's concern about the supply of crude oil in the Middle East has intensified. The UAE produced 2.88 million bpd of crude oil in December last year, an important production growth point in OPEC+.

At a time when the oil market is becoming more and more in short supply, many institutions have expected oil prices to exceed $100 / barrel. Goldman Sachs has raised its Brent crude oil price forecast for the third and fourth quarters of 2022 by $20/b to $100/b, while raising its Brent crude price forecast for 2023 from $85/b to $105/b.

However, Wang Chengqiang reminded that international oil prices have exceeded $100 several times, but they are basically difficult to last. Crude oil is known as the "king of commodities" and is the blood of industry. Persistently high oil prices could trigger an excessively rapid tightening of monetary policy in the West, which in turn could lead to an increased risk of financial turmoil and exacerbate correction pressure on crude oil markets.

In Wang Chengqiang's view, traditional fossil energy is in the trend of the "decarbonization" era, although crude oil prices rose to a multi-year high, but the industry capital expenditure is still sluggish, which may prolong the time of low inventory in the market, becoming the key to the bull market in the post-epidemic era of the bull market beyond expectations. Considering the long-standing problem of low crude oil inventories and low capital expenditures, it is expected that crude oil prices will rise significantly more than expected.

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