Why oil prices are not infected with “amicran”
Oil prices have shown steady growth since December 2, when OPEC + member countries decided to maintain a monthly increase in production of 400,000 barrels per day, according to ICE.
On December 2, after a ministerial meeting of OPEC + a barrel of Brent oil with delivery in February cost $ 69. On December 7, the price rose to $ 75, and on the 8th it approached $ 75.8 per barrel. At the same time, before the publication of the final communiqué of OPEC + on December 2, the reference mark fell in price, falling to $ 66 per barrel.
Amid rising oil prices, analysts at international rating agency Fitch Ratings have raised their forecast for the average annual price of Brent oil from $ 63 per barrel (estimated in September) to $ 71 per barrel. In 2022, according to new estimates by Fitch Ratings, the price of oil will be $ 70 per barrel (against the previous forecast of $ 50), and in 2023 – $ 60 per barrel (previously – $ 53).
The position of OPEC + was put under pressure by the factor “amicron” – a strain of coronavirus, detected by the WHO in Africa in late November and can infect even the vaccinated population. Due to the possibility of new lockouts in Europe, it was decided to postpone the meeting of the OPEC + monitoring committee for two days. In addition, in November, the United States announced its readiness in a few months to market about 50 million tons of oil from strategic reserves to reduce gasoline prices. The United Kingdom, Japan, China, India and South Korea supported them in this decision.
The current format of the OPEC + agreement, which aims to regulate the oil market, has been in force since April 2020. Then the oil-producing countries decided to reduce production by 9.7 million barrels from May 1, 2020. Since August, its participants have agreed to increase production by 40 per day.
Market demand is recovering faster than supply is growing, said Raiffeisenbank analyst Andrei Polishchuk. According to him, “the market feared the introduction of new restrictions due to the situation with the coronavirus, but the decision of OPEC + to continue to increase production dispelled these fears.” He added that the rise in oil is also due to high gas prices, which is becoming particularly noticeable with the onset of winter. If new restrictions are not imposed due to the coronavirus, the rise in oil prices will continue in the near future, Polishchuk said.
According to the ICE exchange, on December 8 at the Dutch hub TTF January gas futures cost about $ 1210 per 1,000 cubic meters. m. High gas prices in Europe remain amid a record shortage of underground gas storage facilities. According to Gas Infrastructure Europe (GIE), on December 6, European storage facilities were filled by only 65% (70.9 billion cubic meters).
Polishchuk noted that if the new restrictions due to the coronavirus are really introduced and affect air and road transport, the demand will fall and oil prices will fall. “In this situation, the decision of OPEC + to increase production is associated with a certain amount of risk,” – said the analyst.
Anton Ussov, head of KPMG’s international practice, like Polishchuk, believes that the long-term trend of increasing demand will continue in the near future.
According to the expert, this is partly due to the fact that for a number of OPEC + member states, including Russia, it may be technically difficult to increase production and put additional volumes of oil on the market. Thus, even if OPEC + continues to follow the plan to increase production by 400,000 barrels per day, demand will still grow faster than supply.
According to Usov, the decision of OPEC + to continue to increase production suggests that the threat of new lads is not considered too serious by the parties to the agreement. The growth rate of demand allows us to predict that in 2022 the average price of oil will stay in the range of $ 70-80 per barrel, he said.
Despite the growth of quotations, oil still remains undervalued, said senior analyst at Alfa Bank Nikita Blakhin. According to the expert, in the event of a normalization of the market situation, oil prices in the short term may return to levels exceeding $ 75 per barrel.