International Oil Price Rally... "Going Up to 80 Dollars"

[Asia Economy Reporter Yujin Cho] International crude oil prices have been continuing their upward rally since the beginning of the year. There are also forecasts that the upward pressure will increase again due to expectations that supply recovery will be slower than demand recovery.

On the 12th (local time) at the New York Mercantile Exchange (NYMEX), March delivery West Texas Intermediate (WTI) crude oil closed at $59.47 per barrel, up 2.1% ($1.23) from the previous day. After rising for eight consecutive trading days and falling the day before, it turned upward again in just one day. At the London ICE Futures Exchange, April Brent crude was trading at $62.60 per barrel, up 2.4% ($1.46) as of 3:06 p.m.

Crude oil prices, which fell below $30 per barrel in April last year due to the spread of COVID-19, began to rise from the end of last year when vaccines started to be distributed. Expectations that demand, which had been depressed by COVID-19, would recover became the driving force behind the rise.

British oil company Royal Dutch Shell placed a large purchase order in the North Sea crude oil auction earlier this month. According to market research firm S&G Global Platts, Shell's order volume was the largest single-company bid since 2008.

Asian crude oil demand has also been confirmed to have increased significantly since the beginning of the year. According to Bloomberg News, the volume of crude oil exported from Louisiana ports to the Asian region last month reached a record high for January. The volume exported to South Korea, China, India, and others approached 15 million barrels.

The supply side also had a significant impact. OPEC+ (an alliance of 13 OPEC member countries and 10 major oil-producing countries including Russia) cut production by an average of 7.125 million barrels per day compared to October 2018 as of this month, and on the 3rd announced that it would maintain the production cut trend for a while, raising expectations that supply will be kept lower than demand, which is increasing the upward momentum.

There is also analysis that the oil production of the Organization of the Petroleum Exporting Countries (OPEC) does not meet the level expected by the market. Market insiders expect OPEC to adjust production until mid-year to reduce excess supply.

Gary Cunningham, director at Tradition Energy, said, "We are seeing major oil-producing countries adjusting production simultaneously with the distribution of COVID-19 vaccines," adding, "Because of these two reasons, oil prices continue to rise." Goldman Sachs predicted that oil prices will rise to $65 per barrel by July.

U.S. hedge funds forecast that prices will soar to $80 per barrel by the end of this year. Jean-Louis Le Me, head of Westbeck Capital Management, a hedge fund headquartered in London, analyzed, "The U.S. is expected to achieve herd immunity by July, which will significantly stimulate oil demand."

David Tawil, founder of New York hedge fund Maglan Capital, also projected that Brent crude will reach $70 to $80 per barrel by the end of this year.

This content was produced with the assistance of AI translation services.