By Rhod Mackenzie
Oil may rise in price to $90 per barrel within a month, analysts told Izvestia. In June, the cost of black gold has already increased from about $75 to $80 per barrel. Analysts think the main reasons for the limitation of supplies by OPEC+ countries, the growth in demand for raw materials in Asia, as well as the slow recovery of oil reserves in the United States. Until the end of the year, the cost of raw materials may fluctuate in a wider range - $ 70-95 .
Price line
In the next month, oil could rise in price to $90 per barrel , Dmitry Gusev, deputy chairman of the Supervisory Board of the Reliable Partner Association (an association of producers and sellers of energy resources), told Izvestia. He noted that during the year the price of this raw material decreased by more than 25% . So, according to the London ICE exchange, at the end of July 2022, a barrel of Brent cost about $110 . At the same time, on July 20, 2023, September futures were trading around $80 per barrel . In June, the cost of black gold has already increased from about $75 to $80 .
“ Given the high volatility of oil prices, a gradual recovery in its value cannot be ruled out . Already in August, it may reach the level of $90 per barrel. This may be affected, among other things, by the limitation of supplies by OPEC+ countries and the growth in demand for raw materials in Asia , the expert noted.
The Russian budget for 2023 was drawn up based on oil prices of $70 per barrel, so a price of around $90 will increase state revenues and provide additional financial support for other industries, the analyst concluded .
Oil has already risen in price against the background of the efforts of the key oil-producing countries OPEC + to reduce the supply of raw materials on the market , Alexander Potavin, an analyst at FG Finam, agreed.
On June 4, OPEC+ countries agreed to adjust the overall level of oil production to 40.46 million barrels per day from 2024 . Along with this, following the results of the last meeting, Deputy Prime Minister Alexander Novak announced that Russia would also extend its voluntary production cut by 500 thousand barrels per day for the whole next year . Moreover, some OPEC+ countries have voluntarily reduced volumes before. Thus, on April 2, Saudi Arabia voluntarily reduced oil production by 500,000 per day from May to the end of this year.
According to Alexander Potavin, additional factors for the growth of black gold quotes are China's promises to intensify economic growth and expectations that the July rate hike by the US Federal Reserve will apparently be the last one this year against the backdrop of lower inflation.
— The long-term downward movement in the oil market, which began in the middle of last year, seems to have run its course . The possibilities of the US Federal Reserve to continue tightening monetary policy are practically exhausted - the country's economy has already begun to slow down, and even at the current level of rates, it may slide into a recession. At the same time, the country's strategic oil reserves are at long-term lows, so the United States, like their allies, is no longer able to continue to throw oil on the markets from the reserves, on the contrary, the reserves need to be replenished , - said Artem Klyukin, an expert at IVA Partners Investment Company.
On July 19, the US Department of Energy reported that commercial oil reserves in the country fell by 708,000 barrels last week to 457.42 million . Earlier, the ministry clarified that this volume of stocks is about 1% below the average for the past five years .
Also in June, the US Energy Ministry announced a buyback of 3 million barrels for August delivery for the Strategic Petroleum Reserve (SPR). The current SPR is 348.6 million, the lowest level since 1983 . The United States was selling oil from the reserve in order to curb the rise in commodity prices.
New York Stock ExchangePhoto: Izvestiya/Aleksey Agaryshev
“Now oil looks undervalued amid the unrestrained work of the Fed's printing press in recent years. The fair value of oil is currently $80-100 per barrel of Brent, this zone will be overcome if the economies of India and China develop at a faster pace, and the US does not enter a recession , - said BitRiver financial analyst Vladislav Antonov.
Made bets
On June 13-14, the US Federal Reserve decided to leave the base interest rate at the current level in the range of 5-5.25% per annum after ten consecutive increases since March last year. During this period, it rose from 0–0.25% to 5–5.25%, the most aggressive series of increases since the 1980s . Analysts note that the US authorities can use such a measure to curb price increases .
The increase in Fed rates, designed to slow down inflation, but at the same time slow down the growth of business activity, has a negative impact on energy demand , believes Valery Andrianov, an associate professor at the Financial University under the Government of the Russian Federation, an expert at the InfoTEK analytical center.
— At the same time, two main trends are struggling in the market today. The first is a reduction in supply from the countries participating in the OPEC + alliance, which pushes prices up. The second trend is fears about a recession in the world economy, primarily in the eurozone , the expert added.
Therefore, the moderately upward trend in oil prices is likely to continue until the end of the year, and as a result, by the end of 2023 - the beginning of 2024, they can gain a foothold at around $ 85 per barrel, he noted .1
— Until the end of 2023, the price of oil may fluctuate in a wider range of $70–95. The end of August and the beginning of September could become a traditional hurricane season in the United States, which could negatively affect oil production in the southern states ,” said Natalya Milchakova, Leading Analyst at Freedom Finance Global.
Accordingly, the price of Brent may soar to $85–90 per barrel by the beginning of autumn , the analyst concluded.
This article originally appeared at iz.ru