International oil prices enter an upward cycle?

Just a step away from $90/barrel

Brent and U.
S.
WTI are both up about 13 percent
year-to-date as traders bett that the oil market will be severely undersupplied later this year.

Since January, the price of Brent crude oil has been just one step away
from $90 a barrel.
On Jan.
18, Brent crude rose 1.
9% to $88.
13 a barrel, its highest level since October 2015; On January 19, it exceeded $89 / barrel, up more than 1.
6% on the day, hitting a seven-year high
.

WTI crude oil prices rose nearly 6% in the three trading days ended January 20, closing at $85.
43 per barrel on January 18, the highest closing price since October 13, 2014, and closing at a new high of $86.
96 per barrel
on January 19.
However, WTI crude oil prices fell back to $86.
24 per barrel
on January 20 as data from the American Petroleum Institute released data that US crude inventories increased by 1.
4 million barrels.

Statistics show that international oil prices have risen by about 30% since the end of November last year, due to stronger-than-expected demand and a significant tightening of supply disruptions in the market
.
It is reported that on January 17, an oil depot in the United Arab Emirates was attacked; On January 18, the Kirkuk-Ceyhan pipeline, a key oil pipeline from Iraq to Turkey, was suspended due to an explosion, adding pressure to an already tight oil market as oil production growth in the Gulf region was significantly weak
.

The gap between supply and demand may continue to widen

According to OPEC's latest production data, Angola, Saudi Arabia, Iraq and the United Arab Emirates all increased their monthly production in December, while Nigeria and Libya continued to decline
.
Goldman Sachs expects total OPEC+ spare capacity to fall to a "historic low"
by the summer.

On January 19, the International Energy Agency (IEA) raised its forecast for oil demand growth in 2022, saying that the new pandemic has hardly had much impact on demand, but the global oil market situation is still tighter
than expected.
The OPEC+ coalition led by Saudi Arabia and Russia achieved only a 60% increase in production in December, and countries such as Nigeria, Angola and Malaysia are struggling to cope with capacity constraints
.

So far, OPEC+ has been sticking to the slow production increase plan reached in July last year, increasing production by 400,000 b/d
per month.
Global oil supply is dwindling this year, and demand is expected to reach 99.
7 million b/d, about 200,000 b/d
higher than in 2019, the IEA said.
At the same time, soaring natural gas prices have also caused most of the gas demand to shift to oil
.

Wall Street investment banks generally believe that unless supply increases significantly, oil prices are likely to exceed $100 per barrel
this year.
Goldman Sachs expects OECD oil inventories to reach their lowest level since 2000 by the middle of this year, which will push Brent crude prices "easily to $96 a barrel.
"
Goldman Sachs warned: "The surprisingly large supply gap could push Brent crude prices above $
100 per barrel in 2023.
" ”

"Commodity traders generally believe that as the global economy gradually rebounds after the pandemic, it is becoming increasingly difficult for the oil supply side to keep up with the pace
of demand growth.
" Paul Horsnell, commodity strategist at Standard Chartered, admitted
.

Uncertainty remains in the direction of oil prices

However, there are still some forecasts that even if the oil price "breaks 100", it will not stay for too long
.
Woodlen, CEO of ExxonMobil, the largest oil company in the United States, said in an interview with CNBC News that oil prices will eventually show a downward trend
.

"The two international benchmark oil prices, which have reached their highest levels in many years, are not very attractive
.
" "Frankly, we expect a lot of volatility in the oil market and lower oil prices in the future
," Woodlen stressed.
”

It is worth mentioning that the oil price approaching $90 / barrel has made the United States "not calm"
.
U.
S.
National Security Council spokeswoman Emily Horne said publicly: "We will continue to work with oil producers and consumers, and these measures have had a real impact
on prices.
" ”

The U.
S.
Energy Information Administration expects Brent crude to average $75/barrel this year and $68/barrel
in 2023.
Citi also believes that there is still the possibility of a "sharp decline" in oil prices, and it expects Brent crude oil prices to fall to $54 per barrel
by the end of 2023.

BNP Paribas, while believing that the probability of oil prices breaking above $100 is greatly increased, advises investors to be cautious
.
The bank said that on the one hand, the United States has made it clear that it will go all out to increase oil supplies to stabilize oil prices, coupled with the increase in U.
S.
oil inventories for a long time, although the increase is not large, but at least it indicates that the downward trend of inventories may end.

On the other hand, the chaos in the Gulf region has temporarily ended, and the uncertainty of the continued rise in oil prices in the short term has increased
.