Oil Prices Expected to Increase in Second Half of Year, Says International Energy Forum Official
According to an official from the International Energy Forum, oil prices are set to rise in the second half of the year as supply struggles to meet demand. Joseph McMonigle, Secretary General of the International Energy Forum, attributes the push in oil prices to increasing demand from China and India, two of the world’s largest oil consumers after the United States.
McMonigle spoke to CNBC about the liquified natural gas (LNG) market, noting that the stability in Europe’s energy market is due to a warmer than expected winter in 2022. However, he cautioned that the next couple of winters could be rocky and emphasized the need for more investment in renewable energy to ensure energy security.
While demand for oil has quickly bounced back to pre-Covid levels, supply is struggling to catch up, resulting in potential supply-demand imbalances. McMonigle stated that the fear of a looming recession is the only factor currently moderating prices. He predicts serious problems with supply keeping up in the second half of the year, which will lead to price increases.
China and India are expected to contribute significantly to the increase in demand, with a combined pick-up of 2 million barrels per day in the latter half of this year. McMonigle believes that prices could potentially go higher from the current $80 per barrel, and steep decreases in inventory will signal that demand is picking up.
However, McMonigle is confident that the Organization of the Petroleum Exporting Countries and its allies (OPEC+) will take action and increase supply if a significant supply-demand imbalance occurs. He highlighted the cautiousness of OPEC+ in monitoring demand and being responsive to changes in the market.
As for the current oil prices, Brent crude futures settled at $81.07 per barrel, and West Texas Intermediate crude ended the trading day at $76.83.
In summary, the International Energy Forum predicts an increase in oil prices in the second half of the year due to supply struggling to meet demand. Increasing demand from China and India, along with potential supply-demand imbalances, are the key factors driving this trend. The stability in Europe’s energy market is attributed to a warmer than expected winter, but energy security concerns remain for the next few winters. Investment in renewable energy is necessary to ensure a smooth energy transition and maintain public support for climate policies.