International oil prices have fallen sharply this year, will they rise again?

With the continuous geopolitical tension and the increasingly severe inflation situation, international oil prices have been running
at a high level.

But in recent times, oil prices have plunged
frequently.
In June, New York and Brent futures fell nearly 8% and 11%,
respectively.
For the first time in a single month, will international oil prices rise again?

A number of factors caused oil prices to fall

There are many reasons for the recent decline in oil prices: on the one hand, global central bank tightening, investors' heightened fears of a global recession, and a weakening outlook for crude oil demand have put downward pressure on oil prices; On the other hand, OPEC+ reaffirmed at the 30th ministerial meeting that it would maintain the previously announced production quota adjustment plan, and decided to increase the crude oil production quota by 648,000 barrels per day in August, restoring nominal oil production to pre-pandemic levels
.

After the announcement of the increase in production, international oil prices have fallen
.

Amos Hochstein, a senior adviser to U.
S.
energy security, said the U.
S
.
hoped that OPEC+'s plan to increase production by 648,000 b/d in July and August was the "first step" of its supply policy, followed by a "second step.
"

As consumers suffer from skyrocketing oil prices, the United States desperately wants oil prices to cool
.
To this end, the United States has repeatedly released strategic crude oil to increase marginal supply and curb the rise
in oil prices.

Repeated epidemics and rising inflation have disrupted crude oil demand, and now that US gasoline demand has shown signs of weakness, the market outlook is difficult to say optimistic, leading to lower oil prices
.

Russia, despite frequent sanctions, increased its oil production in June
.

Russia's oil production reportedly increased by nearly 5% to 1.
46 million mt/d (10.
7 million b/d)
in June.
In addition, the current market has greatly digested the impact of the Western ban on Russian oil, and concerns about oil supply have slowed, further helping oil prices to cool.

Supply tightness intensified

Despite the recent volatility in oil prices, the continued tightening of crude oil supply should intensify
in the long run.

According to research by Norwegian energy consultancy Rystad Energy, the total amount of recoverable oil in the world is now down 9% from last year, which could deal a major blow
to global energy security.

According to the analysis, the total amount of recoverable oil in the world is currently estimated at 1.
572 trillion barrels, 152 billion barrels
less than the total in 2021.

The U.
S.
Energy Information Administration (EIA) also said that due to Western sanctions against Russia, global crude oil excess capacity in May was less than half
of the 2021 average.
Non-OPEC spare capacity fell 80% year-on-year through May, with OPEC's spare capacity falling to 3 million b/d
from 5.
4 million b/d a year earlier.

"We need more oil to meet growing transport demand, and any action to curb supply will soon adversely
affect global gasoline prices.
" Per Magnus Nysveen, head of analytics at RichConsulting, said
.

Will it rise again in the future?

Although the recent short-term correction in oil prices has attracted a lot of attention, the trend of rising international oil prices since the beginning of this year cannot be ignored
.

In the first half of this year, the average price of WTI crude oil increased by $39.
30 per barrel, or about 63.
17%, compared with 2021, and the average price of Brent crude oil increased by $39.
35 per barrel, or about 60.
32%,
from 2021.

Will international oil prices rise again in the future?

A number of institutions believe that in the medium and long term, international crude oil still shows a lack of supply elasticity, and oil prices will remain high for a period of time in the future
.

First, despite OPEC+'s announcement of an increase in production, many parties are skeptical about its ability to increase production because its main members Saudi Arabia and the United Arab Emirates are approaching their production capacity
.

Secondly, the current supply chain bottleneck of U.
S.
shale oil restricts the production capacity of U.
S.
crude oil, and the marginal increment of each oil product supply side is limited or promotes the price of various oil products to rise
more than expected.

Third, under the current geopolitical situation, the uncertainty of Russian oil has intensified
.
At present, the G7 has agreed to set a price cap on Russian oil and gas imports, and is studying a complex mechanism to limit the price of Russian oil, the ripple effect of which may further push up oil prices
.

Jinlianchuang expects that the price caps set by Western countries on Russian oil and gas and the turbulent political situation in some oil-producing countries may trigger concerns about crude oil supply, thereby keeping oil prices high and volatile
.

JPMorgan believes that Russia has the ability to cut crude oil production by 5 million barrels
per day without unduly damaging the economy.
For much of the rest of the world, however, the outcome could be catastrophic: if U.
S.
and European sanctions prompt Russia to impose retaliatory production cuts, global oil prices could reach $
380 a barrel.