World oil prices promise to conquer new highs. During Wednesday's trading, the price of Brent futures on the London ICE Futures exchange rose above $122 per barrel. However, on Thursday, the quotes of oil were in some confusion, rising then falling during the auction. One of the reasons for the fluctuations in quotes probably lies in the uncertainty of the situation with the coronavirus in China.
The cost of August Brent futures on the London ICE Futures exchange at the time of preparation of this material was $123.07 per barrel, which is 0.41% lower than the closing price of the previous session. The price of WTI futures for July on the electronic trading of the New York Mercantile Exchange by this time was at $121.56 per barrel, that is, 0.47% lower than the final value of the previous trading day.
Shanghai authorities lifted restrictions in early June, but at the same time intend to close seven districts of the city next Saturday for mass testing for COVID-19. It is clear that these new restrictions on the movement of people are not good for the recovery of oil demand in China.
However, despite the obvious negative that the news from China forms the market, most of the other indicators, on the contrary, support it. Ole Hansen, Director of Commodity Strategy at Saxo Bank, notes that it is extremely important for the commodity market that gasoline stocks in the United States and Cushing oil inventories continue to decline, while the behavior of American drivers does not change.
According to the US Department of Energy, oil reserves in the country increased by 2.02 million barrels to 416.76 million last week. This figure is about 15% lower than the average level for this time of year over the past five years. The reserves of oil at the terminal in Cushing, where oil traded on the New York Mercantile Exchange is stored, decreased by 1.6 million barrels last week, gasoline reserves decreased by 812,000 barrels.
According to the head of Trafigura, Jeremy Weir, one of the world's largest independent oil traders, world oil prices have every chance to show a "parabolic" movement this year, that is, to rise to record highs, thereby provoking a significant slowdown in global economic growth.
Today, the state of energy markets is critical due to sanctions against Russia. Weir, speaking at the FT Global Boardroom conference on Tuesday, expressed the opinion that significant problems will overtake the commodity market in the next six months. It has every reason to move noticeably, and prices will grow much more significantly. According to the forecasts of Weir, in the coming months, oil prices may reach $150 per barrel and even higher. This will happen amid changes in energy flows, when Russia redirects oil exports from Europe.
If such high energy prices persist for some time, the world will witness a strong decline in demand. In such conditions, it will be extremely problematic to maintain a new price level and at the same time restrain the economic downturn.
According to the expert, the production of oil in Russia has already decreased by 1.3 million barrels per day, that is, by more than 1% of global demand. The Russian Federation has also reduced the output of diesel fuel and gasoline by about the same amount. The introduction by the European Union of an embargo on part of the supply of Russian energy resources promises that oil production in Russia will fall further.
