On Tuesday (14-06-2022), oil prices gained almost 2% as tight global supply offset concerns that a probable recession and new COVID-19 regulations in China would hurt consumption.
At 1405 GMT, Brent oil futures were up $2.60, or 2.1 percent, to $124.87 a barrel, while WTI crude in the United States was up $2.42, or 2%, to $123.35 a barrel.
A decline in shipments from Libya, which has been beset by political instability that has harmed output and ports, has exacerbated the shortage.
Other OPEC+ members are failing to achieve their quotas, and Russia’s oil is under sanctions as a result of the Ukraine conflict.
“The continued worldwide pressure on refined goods, combined with a lack of investment to bring new supply online from OPEC members or other sources, means lost Russian output is nowhere near being compensated by global markets,” said Jeffrey Halley, senior market analyst at OANDA.
UBS boosted its Brent price projection for end-September to $130 a barrel, up from $115 before, and to $125 for the next three quarters.
“We have raised our oil price projection due to low oil stocks, declining spare capacity, and the possibility of supply growth behind demand growth in the coming months,” the bank stated.
Fitch increased its Brent and WTI pricing forecasts for 2022 by $5 to $105 and $100 per barrel, respectively.
The market will be looking for weekly inventory data from the American Petroleum Institute on Tuesday and the United States Energy Information Administration on Wednesday to see how tight crude and gasoline supply remains.
According to six experts surveyed by Reuters, crude stocks in the United States fell by 1.2 million barrels last week, while gasoline inventories increased by 800,000 barrels and distillate inventories, which include diesel and heating oil, were steady.
On the demand side, China’s newest COVID epidemic, which was connected to a Beijing bar, has sparked worries of a fresh round of lockdowns, just as the country’s restrictions were being loosened and gasoline consumption was set to rise.
The Organization of Petroleum Exporting Countries (OPEC) maintained its projection that global oil consumption will approach pre-pandemic levels in 2022 in its monthly report, but warned that Russia’s invasion of Ukraine and events connected to the coronavirus pandemic represent a significant danger.
According to OPEC delegates and industry insiders, demand growth will stall next year as rising oil prices assist to push up inflation and act as a drag on the global economy.
Looking forward, if the US Federal Reserve shocks markets with a higher-than-expected interest rate hike to manage inflation when it meets on June 14-15, oil prices may be under pressure.
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