Caymans Post

A world within. A state apart.
Tuesday, May 24, 2022

Oil likely to hit $100 as worries of supply disruptions, limited spare capacity rise

Oil likely to hit $100 as worries of supply disruptions, limited spare capacity rise

Oil prices are most likely heading towards $100 a barrel on Feb.22. as worries over supply disruptions mount at a time of increased demand.
"We are heading to a possible strong $100 market on a combination of limited supply options and threat of war, which possibly will destabilize other regions too," said Cyril Widdershoven, an energy, commodities and security advisor based in the Netherlands.

As fears of a supply shortage due to Russian aggression grew, the price of Brent crude oil futures contracts April delivery on London's ICE rose by 4.18 percent to $99.38 on Tuesday morning, the highest since 2014.

West Texas Intermediate rose as much as 4.4 percent to $94.65 a barrel.

Brent went back to $96 later in the day and WTI traded at $92, but the bullish sentiment is still there.

"The main reason for the current rise in prices is clear. Demand is still showing strong growth, inspired also by relaxation of COVID measures especially when the summer season is approaching. At the same time OPEC+ is underproducing due to production issues in many members of the group including Russia," Widdershoven told Arab News.

"There are worries in the market that spare production capacity is low or non existing as investments have been down in upstream for almost 10 years, which also limited the increased surge of shale oil," he added.

Oil has been trading at record highs in recent days due to concerns of possible disruptions in supply that may happen if Russia invades Ukraine.

However, Moscow repeatedly denied the possibility of a military incursion, giving hope that oil prices will stabilize.

Alongside this unprecedented rise in oil prices, Germany halted the Nord Stream 2 Baltic Sea gas pipeline project, which is considered Europe's most divisive energy project, worth $11 billion.

The Nord Stream 2 Baltic Sea gas pipeline project was designed to double the flow of Russian gas direct to Germany. Even though the project was completed in September 2021, it has been idle due to the non-receipt of certification by Germany and the EU.

Russia makes up for a third of Europe's natural gas production, and 10 percent of the global oil production. Oil prices could further fluctuate and rise in the coming days as a third of Russian gas supplies to Europe are traveling through Ukraine.
Newsletter

Related Articles

Caymans Post
×