With the oil price trading around $90 a barrel this week, questions started to emerge if the oil prices will hit a century this summer. The geopolitical conflicts that have engulfed the world are making many believe that oil prices can hit the global benchmark of $100 for the first time in almost two years.
The fears have also amplified the inflation concerns which is causing complications in central banks’ rate-cut deliberations. “For oil, the bigger drive right now is on the supply side,’ Amrita Sen, founder and director of research at Energy Aspects Ltd, told Bloomberg.“You have seen quite a few pockets of supply weakness, and demand overall on a global basis is healthy,” she added.
Factors contributing to price hike
There are several factors that can contribute to the possibility of a hike in oil prices to a whopping $100 a barrel:
1. When it comes to the Middle East, the ongoing tussle between Iran and Israel acted as a trigger to the oil prices jumping over $90 a barrel just a few days ago.The horrors of Houthis in the Red Sea have caused a major impact on the supply chain by delaying crude oil shipments.Earlier this month, the Organisation of Petroleum Exporting Countries and its allies (OPEC+) conducted its joint ministerial monitoring committee meeting (JMMC), following which it was announced that they are keeping the supply policy unchanged till mid-2024.Shortly after the verdict, the crude oil prices settled at their highest levels since October.
2. The raging Russia-Ukraine war has impacted the supply of oil in Europe and around the world in a significant manner. American and European sanctions have stranded Russian cargoes at sea.The price cap on Russian oil has forced Moscow to sell oil at a cheaper rate. This in turn resulted in Russia being conscious about its supply strategy.Earlier this month, the International Energy Agency warned that Saudi Arabia and Russia’s production constraints would likely result in a “substantial market deficit” through the fourth quarter, CNBC reported.
3. Two major factors are taking place in Latin America that have impacted the oil prices as well. A recent move by Mexico to slash its crude exports is compounding a global squeeze, prompting refiners in the US to consume more domestic barrels.With the brewing tensions between Venezuela and Guyana over territory, the supply chains of these regions can potentially be the next target.Hence, with all these factors in mind, the concerns of crude oil hitting the $100 mark have come to the forefront.
Source:https://www.firstpost.com