Demand recovery supply side but constantly chaotic, $90 oil price or become the norm in the future?

On Tuesday (January 28), crude oil prices climbed to their highest levels since 2014 as tensions in the Middle East heightened fears of supply shortages. Attacks in the Middle East Gulf could lead to supply disruptions, exacerbating an already strained supply outlook. Some analysts believe the attack could lead to more hostilities between Iran and Saudi Arabia.

The supply of OPEC+ oil market is tightening, and the geopolitical situation in the UAE is even worse

Oil prices rose to more than seven-year highs due to supply concerns after Abu Dhabi drone strikes triggered fuel truck explosions and sparked geopolitical tensions in the region. Overall, oil prices have risen more than 10 percent since the start of the year, reaching their highest level since 2014.

On Monday, in a drone strike, three tanker trucks exploded and caught fire near the warehouse of oil company ADNO. Yemen's Houthi group, allied with Iran, said it was an attack in the heart of the United Arab Emirates (UAE). According to local reports, the accident killed 3 people and injured 6 others. The Houthi movement said they could attack more facilities, while the UAE responded that it reserved the right to "respond to these terrorist attacks."

Brent crude prices surged to their highest level in seven years on Tuesday. Analysts said the oil price rally is unlikely to slow as production continues to decline.

Oil prices edged higher again earlier this week, extending the astonishing rally since bottoming out in early December. OANDA analyst Craig Erlam said oil prices rose more than 30 percent over the period and appeared to still be gaining momentum.

"Oil prices depend on OPEC+'s ability to increase its supply of 400,000 barrels of crude oil per month," Elam said. There is evidence that things are not so simple, and after a period of underinvestment and disruption, the organization's output is significantly lower than the target. This should continue to support oil prices and increase the expectation of triple-digit oil prices. ”

ASH Glover of CMC Markets said analysts' forecasts predict that demand will return to a more normal trajectory as the world recovers from a two-year lockdown, and demand will outstrip supply this year.

Investment banks and traders stressed the gap between supply and demand, and oil prices are expected to continue to soar

On Tuesday, Goldman Sachs reported that solid fundamentals reversed the decline in oil prices at the end of last year, and the market still unexpectedly had a large supply gap because the Impact of the Aumechjong variant on demand was far less than that of Delta.

Goldman Sachs raised its Spot Price Forecast for Brent crude oil for the third and fourth quarters of 2022 by $20/barrel to $100/b; raised its 2022 price forecast from $81 to $96; and raised its 2023 Brent oil price forecast from $85/b to $105/b

Analysts at the bank expect Iranian oil production to increase until 2023, adding: "Based on our updated demand and supply elasticity data, reaching the supply-demand balance again will require oil prices to remain above $90/barrel for a long time." ”

Analysts at the same time expect inventories to shrink, but until the first quarter of 2012, when the global oil surplus will be below seasonal levels at 400,000 bpd. Global oil demand is expected to average 101 million b/d in the first quarter and then decline to 100 million b/d in the second quarter, a decline that is smaller than the seasonal decline after the outbreak rebound caused by the Opichron variant, followed by an average of 101.5 million b/d in the second half of the year.

Meanwhile, Mike Muller, head of Asia at Vitol Group, the world's largest independent oil trader, said: "The strong spot premium is very reasonable. Mueller added that the high price of natural gas has led to a decline in consumption by some industrial users, but oil has not yet reached that price level.

Speaking about the gas industry at an industry webinar, Mueller said: "One day, people will no longer buy expensive energy." He added: "The question is, to what extent will this affect the oil market?" Notably, but Mueller also noted that the White House may decide to release more crude oil on top of the 50 million barrels of strategic petroleum reserve announced last November.

On Tuesday (January 18) at 20:30 Beijing time, OPEC+ will release its monthly report, from which investors will look for further clues to the prospects of supply and demand in the oil market.

This article originated from Huitong Network