Oil prices hit 100 "countdown"! Consumers are miserable, and Iranian crude oil enters the market?

　　The severe situation in Ukraine has made the already tense energy supply and demand relationship worse. International oil prices continued to set new highs since 2014 this week. Brent crude oil is only one step away from the psychological mark of 100 US dollars.

Energy prices are putting huge price pressures on consuming countries and putting central banks in a difficult position to make policy choices.

Tamas Varga, senior market analyst at crude oil broker PVM Oil Associates, said in an interview with China Business News that oil prices at $100 a barrel are only a matter of time.

He believes that in the foreseeable future, OPEC+ will continue to work hard to fulfill its commitment to increase production, and oil prices are expected to remain high.

Insufficient investment limits capacity expansion

　　Since the beginning of this year, international oil prices have fluctuated upwards, with a cumulative increase of more than 20%.

The front-month Brent crude contract touched as high as $99 this week, the highest since September 2014.

Uncertainty over geopolitical factors further complicates the situation.

With the gradual lifting of anti-epidemic restrictions in many parts of the world, recovering demand for aviation and roads is driving energy consumption soaring, while inventories are stretched.

Supply tensions will increase the likelihood of heightened price volatility and upward pressure if the gap between OPEC+ output and its target levels persists, the International Energy Agency said in its monthly market report.

　　Varga said factors such as rising demand, OPEC+ supply constraints, geopolitics and cold snap weather have all supported prices recently.

More importantly, the rebound in oil prices combined with the rapidly rising backwardation reflects the release of bullish sentiment.

At present, the compliance rate of the OPEC+ production reduction agreement is close to 120%, and the release of oil-producing countries' capacity will continue to lag behind the plan in the short term.

Although Saudi Arabia and the United Arab Emirates have the conditions for additional production increases, the two countries have no need and desire to actively break the agreement.

　　There are many reasons for the insufficient supply of oil-producing countries, including the development of mature oil fields in the middle and late stages, insufficient investment in infrastructure such as pipelines, and producers' response to climate change conventions restricting investment in oil and gas development... Saudi Oil Minister Abdulaziz Abdulaziz bin Salman highlighted the risk of an "energy crisis" over the next decade as early as December: "If there is insufficient investment in energy development, the world will enter a dangerous period as a result."

　　S&P Platts predicts that by June this year, OPEC+ sustainable spare capacity will be reduced to 1.2 million barrels per day, and these spare capacity will be increasingly concentrated in Saudi Arabia, the United Arab Emirates and Kuwait, if the market needs more OPEC crude oil, This dynamic must be managed.

In contrast, the production capacity of other countries - especially Russia, Iraq, Angola, Nigeria and Malaysia is still far from the quota requirements.

　　The first financial reporter noticed that major oil and gas producers are also cautious about increasing production. BP CEO Bernard Looney said recently: "What we can expect is volatility in the next few months." Oil prices rose That saw the oil and gas giant record its highest annual profit in nearly eight years, prompting calls for more government taxes on oil and gas companies.

Rooney said the oil market could tighten supply further this year and further support prices above $90 a barrel.

French Total chief executive Patrick Pouyanne also pointed out on a recent earnings conference call that oil prices will remain high this year.

Varga told China Business News that although oil prices have become attractive, companies are facing industry restrictions on multi-national banking loans to increase production.

Taking the U.S. as an example, he noted that most exploration companies still have capital discipline as their top priority, focusing on minimizing reinvestment and maximizing free cash flow.

Proceeds from higher commodity prices will generally be used to repair balance sheets and flow back to shareholders through buybacks, special dividends, etc.

High oil prices hit countries' economies

　　Inflationary pressures from rising oil prices could adversely affect the economies of oil-consuming countries.

HSBC Chief Economist Janet Henry pointed out that given rising global inflation pressures and unprecedented uncertainty surrounding the inflation outlook, the last thing a global economic recovery needs is another rise in energy prices.

　　It is worth noting that more than half of the G20 member countries have inflation rates above 4%, boosted by energy prices, with Brazil, Turkey and Argentina exceeding 10%.

　　In the U.S., the average price of a gallon of gasoline is now approaching $3.49, up from $2.51 a year earlier, according to GasBuddy.

With gasoline prices rising and investors watching the direction of consumer spending, which accounts for more than two-thirds of U.S. economic activity, the University of Michigan consumer confidence index hit its lowest level in more than a decade in early February under heavy price pressures.

　　In the face of pressure, the United States has tried a variety of solutions to suppress oil prices.

The Biden administration has tried to coordinate the release of strategic reserves with other countries. In the past three months, the U.S. Department of Energy has released nearly 40 million barrels of crude oil, and plans a new round of storage dumping. Compared to consumption, it seems like a drop in the bucket.

At the same time, the White House's repeated pressure on OPEC+ to increase production has not had any substantial effect.

　　Against the backdrop of a sharp turnaround in Eastern Europe, Iran has become one of the few options.

Iran's chief nuclear negotiator, Ali Bagheri Kani, said on social media in recent days that work with world powers on reviving the nuclear deal is "closer than ever" to an agreement.

However, significant differences remain over how to achieve a reduction in Iran's nuclear activities in exchange for easing sanctions.

Varga told reporters that oil prices have always been the accepted measure of the achievements of US presidents.

With mid-term elections due in November and oil prices above $90 well above the bottom line, it has become urgent for the White House to rein in rising oil prices.

　　Judging from the recently released popular support ratings, the Democratic election is becoming shaky.

Varga predicts that Iran will eventually return to the market, supplying an additional 1.8 million barrels per day of crude oil, which is expected to largely ease concerns about supply and demand.

However, the risk of oil price fluctuations still exists in the short term. First of all, the timeline of the negotiations related to the Iran nuclear deal has not been fully confirmed. Second, the resolution of the situation in Ukraine is the top priority, because compared with Iran, Russia’s oil and gas production accounts for a larger proportion of the world’s oil and gas production. higher.

$100 oil is 'horrible'

　　The rising oil prices have made many countries miserable.

At the recent oil and gas exhibition in Cairo, Egypt, energy and oil ministers from Egypt, Cyprus, Israel and other countries were deeply concerned that oil prices could climb to more than $100 a barrel.

　　Egyptian Oil Minister Tarek El-Molla said in his speech: "For me, as a professional, I can see this (oil breaking above $100) happening, but I don't want it."

　　Cyprus Energy Minister Natasa Pilides agreed, saying imagining oil prices above $100 a barrel was a very scary concept.

"It's actually pretty close," she added.

　　"Yes, high oil prices are hard to deal with, because on the one hand, energy subsidies have been largely not the norm for the past few months, we're in a difficult situation, and when you start doing it, it's going to be difficult to stop it. "In terms of energy transition, Cyprus definitely needs to stick to its original goals, and natural gas will play an important role as a transition fuel," she revealed.

　　Israel has also adopted energy diversification as a strategy to deal with rising oil prices, with Israeli Energy Minister Karine Elharrar saying: “Oil prices are a very difficult issue, but I think if we don’t want to be left at a loss, then we have to make sure that we Have a variety of energy sources.”

　　As OPEC's third-largest producer, when asked by the media what the organization would do if the situation in Ukraine deteriorated, UAE Energy Minister Suhail al-Mazrouei said, "What is happening is geopolitical tensions, And that's the main driver of crude oil prices. Usually, the actual impact is hard to predict," he said. "I don't want to see a further escalation of the conflict, and hopefully the diplomatic dialogue between Russia and Europe will come to fruition."