Oil Prices Surpass $70 per Barrel After 2 Years... "Q3 Expected to Reach $80" (Comprehensive)

Expectations for Travel Demand Recovery... Gasoline & Jet Fuel Demand Up
OPEC+ "Oil Demand Likely to Increase by 6 Million Barrels"... Production Increase Overwhelmed

[Image source=AP Yonhap News]

[Asia Economy Reporter Hyunwoo Lee] As international oil prices recently surpassed $70 per barrel, the highest in two years, concerns over inflation management have intensified amid forecasts that prices could soar to $80 per barrel in the second half of this year. With the recovery of travel demand, which had been stagnant due to the COVID-19 pandemic, especially in the US and Europe, expectations are rising that demand for gasoline and jet fuel will significantly increase, leading to a sharp rise in international oil prices through the second half of the year.

On the 1st (local time), Fareydon Pesharaki, chairman of the international oil energy consulting group FGE, stated in an interview with Bloomberg News, "With a clear economic recovery centered on the US and Europe and strong market oil demand, international oil prices are expected to rise to around $80 per barrel by mid-third quarter."

In particular, as travel demand is expected to revive from this summer in the US and Europe, there is growing anticipation that demand for gasoline and jet fuel will increase significantly. Due to this expansion in oil demand, international oil prices, which faced concerns of oversupply last year due to the COVID-19 crisis, are forecasted to continue their upward trend until the end of the year.

On the same day, the Joint Technical Committee (JTC), a market forecasting body within OPEC+, stated in a report, "Global oil demand this year will increase by more than 6 million barrels per day compared to the previous year," and "world oil inventories will decrease by at least 2 million barrels per day from September through the end of the year, resolving all previous concerns about oversupply."

Despite the demand growth outlook, major oil-producing countries announced that they will maintain the current policy of easing production cuts without additional increases until July, further fueling the rise in oil prices. OPEC+ stated in a press release, "We reaffirm our commitment to the existing easing of production cuts, and the pace of production will be determined according to market conditions." According to the production increase scale announced by OPEC+ at the April meeting, the additional production will be 500,000 barrels per day in May, 700,000 barrels per day in June, and 881,000 barrels per day in July, totaling approximately 2.181 million barrels per day over three months.

Even if the Iran nuclear deal is reached and US sanctions on Iran are lifted, allowing Iran's daily crude oil production of 3.5 million barrels to enter the oil market, it is analyzed that this will still fall short of the projected 6 million barrels per day increase in oil demand this year.

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