(Finance and Economics) When will the international oil price turn around?

  China News Agency, Beijing, June 5 (Liu Wenwen) After several weeks of discussions and consultations, the European Union recently pushed for the sixth round of sanctions against Russia, and the "partial oil ban" further pushed up international oil prices.

  International oil prices continue to soar, when will there be a turnaround?

  Global oil supply gap further widens

  Under the "partial oil ban", the global oil supply gap has further increased.

  On the one hand, the supply of Russian crude oil fell further.

  Russia is the third largest oil producer in the world and the largest source of oil imports in Europe.

According to a previous report released by the Russian Ministry of Economic Development, Russian oil production in 2022 is expected to fall by 9.3% from the previous year to 475.3 million tons.

  Chen Shuxian, chief analyst of the petrochemical industry of Cinda Securities, pointed out that for Russia, the oilfield production process needs continuous investment, otherwise the production capacity will be exhausted.

At present, with the withdrawal of foreign capital, Russia's upstream capital expenditure will further decline, and it may face the dilemma of a sharp decline in domestic oil fields and a decline in production. The impact of the conflict on the production of Russian crude oil will gradually appear.

  Lin Boqiang, dean of the China Energy Policy Research Institute at Xiamen University, told China News Agency that the "partial oil ban" will force Russia to change the flow of oil trade from the European Union to some countries in East Asia and Africa.

However, market switching is not easy, and even leads to chaos in supply and demand for a period of time, during which oil prices will continue to run high.

  On the other hand, "OPEC+ production increase" is difficult to make up for the Russian supply gap.

  This week, OPEC+ agreed to further increase production, deciding to raise the output increase target from 432,000 barrels per day to 648,000 barrels per day in July and August this year.

However, after the announcement of the resolution, international oil prices still rose slightly.

  According to industry analysis, OPEC+ has always had insufficient willingness to increase production. Although the increase in production exceeded market expectations, it still could not fill the global crude oil supply gap caused by the "partial oil ban".

  In addition, data from the U.S. Energy Information Administration showed that U.S. commercial crude oil inventories fell by 5.1 million barrels last week to 414.7 million barrels.

This data also provided support for the upward trend in oil prices.

  Structural Imbalances May Persist

  Fatih Birol, executive director of the International Energy Agency, warned that oil markets could become tight in the summer, with bottlenecks in diesel, gasoline or kerosene supplies, especially in Europe.

  At the same time, as the aviation industry accelerates its recovery, global oil supply constraints will further increase.

  The UBS Wealth Management Investment Director's Office (CIO) pointed out that Saudi Aramco, the world's largest oil producer, warned at the Davos forum that under the pressure of lobbyists who advocate green issues, most companies dare not invest in the oil industry, and the global oil supply is facing a major crunch.

Whether or not there is a conflict between Russia and Ukraine, problems arising from a lack of investment in the industry, especially during the pandemic, will emerge.

  The view also points out that the oil market is underestimating energy supply risks at this stage.

The current structural imbalances in traditional fossil fuels are likely to persist due to years of underinvestment in the industry.

As a result, Brent oil prices are expected to remain high for the year ahead.

  Wang Yongzhong, a researcher at the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, believes that sanctions imposed by the United States and the West on Russia's energy sector have severely hindered Russia's oil and gas exports, forcing it to cut investment and production capacity.

Western energy companies have basically stopped signing new procurement contracts with Russia, drastically reducing the amount of Russian energy purchases, resulting in a large excess of Russian energy supply, while other European countries have serious shortages of energy supply, so that the rapid rise in international energy benchmark prices and Russia The phenomenon of coexisting energy price discounts.

  The analysis believes that the world cannot immediately get rid of traditional energy supply. Before the successful transformation of new and old energy sources, the world will continue to face the problem of crude oil shortage for many years. In the medium and long term, oil prices will remain high for a long time.

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