Oil has highest price since 2014 amid tensions and tight supply

The price of oil in the international market reached the highest value since October 2014. The barrel of Brent, a world reference, started this Tuesday (18) at R$ 87.60 (R$ 482.25). The commodity classified as WIT (West Texas Intermediate), used as a parameter for a less dense type of oil, also touched the highs recorded nearly eight years ago.

Analysts attribute the oil rise to a combination of geopolitical tensions in producing regions and the decision of the main supplier countries not to increase supply, even in a scenario of growing demand.

In Europe, Russian military moves on the Ukrainian border are raising tensions between Moscow and Washington.

In the Middle East, a drone attack carried out on Monday morning by the Yemeni Houthi rebel group against Abu Dhabi caused a fire near the airport in the capital of the United Arab Emirates and the explosion of three tanker trucks. Three people died.

The main disturbance in relation to the supply, however, is related to the decision of OPEC (Organization of Petroleum Exporting Countries) and allies, such as Russia, not to accelerate the supply of the commodity.

Amid uncertainties about the effects of the omicron variant on the economy, the strategy of the largest exporters is to maintain the current pace of production growth to avoid sudden devaluations due to possible stoppages of economic activities to contain the pandemic.

Despite the global advance of the omni, vaccination has prevented a growth in hospitalizations proportional to the increase in infections. The resumption of economic activities continues and the demand for fuel in a scenario of scarcity, especially during the winter in the northern hemisphere, has been putting pressure on the rise in inflation.

Brent expected to break $100 barrier on firm demand, says Goldman Sachs

Brent oil prices are expected to surpass $100 a barrel this year, analysts at Goldman Sachs said, adding that the oil market remains in a “surprisingly large deficit” as the hit of the coronavirus’ omicron variant in demand for the commodity is, so far, lower than expected.

The impact of the omni on demand will likely be offset by the shift from oil to gas, increases in demand disruptions, shortages in OPEC and allied countries, and lower-than-expected production in Brazil and Norway, analysts said in a press release. note on Monday (17).

Global oil demand grows by 3.5 million barrels a day in 2022 year-on-year, with fourth-quarter demand reaching 101.6 million barrels a day.

Goldman expects OECD balance sheets to fall to the lowest since 2000 through the summer in the northern hemisphere, and spare capacity at major exporters is likely to fall to historically low levels given the slowdown in drilling in major OPEC countries and the difficulties from Russia to increase production.

“We expect a further drop in production from OPEC+ countries to even lower quotas in 2022, with an increase of just 2.5 million barrels per day in production expected for the next nine highs.”

Higher prices will allow OPEC to ease its monthly upward path to preserve spare capacity, with accelerating shale production growth providing a much-needed buffer to inventories, Goldman Sachs added.

The bank also pushed its expectations of an increase in Iranian production to the second quarter of 2023, citing the failure to make progress in negotiations on the Iran nuclear deal.

with Reuters