Oil prices are showing steady growth since December 2, when the OPEC + countries decided to maintain a monthly rate of increase in production at 400,000 barrels per day, ICE data suggests.
On December 2, after the OPEC ministerial meeting + a barrel of Brent oil for February delivery was worth $ 69. On December 7, the price rose to $ 75, and on the 8th it approached $ 75.8 per barrel. At the same time, before the publication of the final OPEC + communiqué on December 2, the benchmark mark fell in price, dropping to $ 66 per barrel.
Against the backdrop of rising oil prices, analysts of the international rating agency Fitch Ratings raised the forecast for the average annual price of Brent crude from $ 63 per barrel (assessed in September) to $ 71 per barrel. In 2022, according to new estimates from Fitch Ratings, the oil price will be $ 70 per barrel (against the previous forecast of $ 50), and in 2023 – $ 60 per barrel (previously – $ 53).
The OPEC + position was under pressure from the omicron-strain factor of the coronavirus, identified by WHO in Africa at the end of November and capable of infecting even the vaccinated population. Due to the possibility of new lockdowns in Europe, it was decided to postpone the meeting of the OPEC + monitoring committee for two days. In addition, in November, the United States announced its readiness to supply the market with about 50 million tons of oil from strategic reserves within a few months to reduce gasoline prices. In this decision, they were supported by Great Britain, Japan, China, India and South Korea.
The current format of the OPEC + agreement, designed to regulate the oil market, has been in effect since April 2020.Then the oil-producing countries decided to jointly reduce production by 9.7 million barrels from May 1, 2020.Since August, its participants have agreed to increase production by 400,000 barrels every month per day.
Market demand is recovering faster than supply is growing, said Andrey Polishchuk, an analyst at Raiffeisenbank. According to him, “the market was afraid of the introduction of new restrictions due to the situation with the coronavirus, but the OPEC + decision to continue to increase production dispelled these fears.” He added that the rise in oil prices is also due to high gas prices, which becomes especially sensitive with the beginning of winter. If no new restrictions are introduced due to the coronavirus, the rise in oil prices will continue in the near future, Polishchuk believes.
According to the ICE exchange, on December 8, at the Dutch TTF hub, January gas futures cost about $ 1,210 per 1,000 cubic meters. m. High gas prices in Europe persist against the background of a record shortage in underground gas storage facilities (UGS). According to Gas Infrastructure Europe (GIE) data, as of December 6, European storage facilities were only 65% full (70.9 billion cubic meters).
Polishchuk noted that if new restrictions due to coronavirus are really introduced and affect air and road transportation, then demand will decrease and oil prices will fall. “In this situation, the decision of OPEC + to increase production is associated with a certain amount of risk,” the analyst concluded.
The head of the international practice of KPMG Anton Usov, like Polishchuk, believes that the long-term trend of increasing demand will continue in the near future.
According to the expert, this is partly due to the fact that for a number of OPEC + countries, including Russia, it may be technically difficult to increase production and supply additional volumes of oil to the market. Thus, even if OPEC + continues to pursue its plan to increase production by 400,000 bpd monthly, demand will still grow faster than supply.
According to Usov, the OPEC + decision to continue increasing production suggests that the parties to the agreement do not consider the threat of new lockdowns too serious. The growth rates of demand allow predicting that in 2022 the average oil price will remain in the corridor of $ 70-80 per barrel, he believes.
Despite the rise in quotations, oil still remains undervalued, said Nikita Blokhin, senior analyst at Alfa-Bank. According to the expert, if the situation on the market normalizes, oil quotes in the short term may return to levels exceeding $ 75 per barrel.
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