Is the world threatened by oil shortages and prices above $ 100 per barrel?

Oil prices have been growing since November and at the moment even broke the barrier of $ 65 per barrel of Brent, which was called by many experts as the upper one for 2021. Against the backdrop of these records and a sharp drop in production in the United States due to cold weather, there are more and more suggestions that oil prices will continue to rise and the quotes for a barrel may return to the 2013 level. That is, above $ 100.

“Abnormal weather in the United States and Siberia can create an imbalance in the global oil market,” says Daniil Nametkin, head of the Center for Investment Analysis and Macroeconomic Research, TsSR. and interrupted supply chains. In Russia, according to Bloomberg, oil production in the first half of February was 10.115 million barrels per day, which is 44 thousand barrels per day lower than the level of January, the fall is due to the cold in Siberia. “

Together with the OPEC + cut, which is now about 7 million barrels per day, and an additional decrease in production by Saudi Arabia by 1.425 million barrels, 12 million barrels per day were removed from the market in February. That is, the total global production is now about 88 million barrels per day, and the demand for oil is more than 91 million barrels per day, which means a deficit of 3 million barrels.

Naturally, prices should rise in such a situation. But this deficit was created artificially, not counting, of course, the climate problem in the United States. The world’s major oil storage facilities are still above normal, although their reserves are gradually declining. It is worth recalling that it was precisely because of the overcrowding of storage facilities in the spring of 2020 that oil prices collapsed. Therefore, there is no real shortage of supply on the oil market, and one should not expect a sharp upward surge in the price of a barrel, although some further growth is possible.

There is also the opposite point of view that the market is too optimistic about the news about the recovery in oil demand in China and India, presenting only the expected victory over the pandemic as a fait accompli. Proof of this is the fact that oil consumption remains below the pre-crisis level by 8-9%. Therefore, the rise in oil prices over the past 4 months has not been supported by fundamental factors, and at any moment the quotes may drop dramatically.

In the short term, the oil market is overheated, and the supply shortage has been created artificially, since Saudi Arabia and other OPEC + countries cut production when demand has begun to recover, Oksana Lukicheva, an analyst for Otkritie Broker commodity markets, believes. In her opinion, in the coming months, the price is expected to be about $ 50 per barrel.

At the same time, low prices have already led to a reduction in investment in the industry, and the ongoing transition to “green” energy in the long run will cause an even greater decline in hydrocarbon production. On the demand side, on the contrary, consumption is expected to grow in the medium term. Moreover, a significant increase will be due precisely to the transition to “green” energy, since this whole process will require colossal energy. This can lead to a significant deficit in the energy market and, accordingly, to an increase in prices. According to some estimates, in the context of 5 years, oil prices can fly up to $ 150 per barrel, Lukicheva said.

But so far there is no shortage of production capacities in the world. Moreover, today they are even redundant. The OPEC countries and the United States can very quickly increase production, says Vladimir Bragin, director for analysis of financial markets and macroeconomics of Alfa Capital Management Company. Therefore, a new supercycle for oil is a very unlikely scenario that is only possible in the event of strong demand. In the context of a slowdown in world GDP growth, including due to a slowdown in population growth and urbanization, with a simultaneous tightening of environmental standards, the picture may be directly opposite, the expert believes.

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