Oil Prices Surge Pauses for Now... Industry Says "Uncertainty Remains"

International Oil Prices Fall on Potential Production Increase by Oil-Producing Countries
Impact of Sharp Rise in Commodity Prices... "Monitoring Volatility Closely"

[Asia Economy Reporter Oh Hyung-gil] Although international oil prices, which soared after Russia's invasion of Ukraine, have plummeted, experts warn that it is still too early to be relieved. There are concerns that if political and economic uncertainties reemerge, it could deal a fatal blow to the domestic industrial sector, which heavily depends on crude oil.

On the 9th (local time), the April West Texas Intermediate (WTI) crude oil price on the New York Mercantile Exchange (NYMEX) closed at $108.70 per barrel, down $15 (12.1%). This is the largest drop since November 26 of last year.

Expectations of increased production by oil-producing countries caused the price to fall more than 10%, dropping below $110 per barrel.

On the London ICE Futures Exchange, May Brent crude also fell $16.84 (13.2%) to $111.14 per barrel, marking the largest daily drop since April 2020.

Earlier, after the United States and the United Kingdom announced a ban on Russian crude oil imports, WTI prices surpassed $130 this week. Brent crude prices also broke through $139 per barrel on the same day, reaching the highest level since 2008.

However, the soaring international oil prices have been curbed due to expectations of increased production. Previously, the United Arab Emirates (UAE) urged the Organization of the Petroleum Exporting Countries (OPEC) to consider expanding oil production.

The OPEC+ group, consisting of OPEC member countries and non-OPEC oil producers, has maintained its existing policy of increasing production by 400,000 barrels per day even after oil prices surpassed $100.

Nevertheless, experts expect market volatility to continue as the war between Russia and Ukraine has not ended.

The key issue is whether Russia and Ukraine will agree on a diplomatic resolution. Expectations for a diplomatic solution have grown as Russian Foreign Minister Sergey Lavrov is scheduled to visit Turkey and meet with Ukrainian Foreign Minister Dmytro Kuleba on the same day.

The domestic industrial sector is closely monitoring trends in crude oil and raw material prices.

In response to the U.S. and Europe's ban on Russian crude oil imports, Russia retaliated with export bans on raw materials. As a result, prices of nickel, iron, copper, and other raw materials have surged simultaneously in the global raw materials market.

On the 8th (local time), nickel prices traded on the London Metal Exchange (LME) in the UK soared 111% intraday to $101,365. Consequently, the LME has suspended all nickel trading.

Copper also reached an intraday record high of $10,845 per ton on the 7th (local time).

The steel industry says that long-term supply contracts mean there is no immediate impact on supply and demand, but they are closely watching the effects of price fluctuations. Electric vehicle batteries, which use nickel as a key material, are also facing concerns over profitability deterioration due to rising raw material prices.

As naphtha prices, the basic raw material for petrochemical products, also soared, the chemical industry is under severe pressure. The naphtha futures contract price recorded $1,078.4 per ton as of the 4th, an increase of $423.25 (70.56%) compared to the previous month, marking the highest level in 14 years since June 2008 ($1,080).

A petrochemical industry official said, "With oversupply and increased raw material costs, profitability is expected to deteriorate significantly for the time being. A decline in domestic naphtha cracker (NCC) operating rates is inevitable, and there is a possibility that profitability across the industry, including downstream companies, will worsen."

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