The oil market could reach a “parabolic state” this year, with prices rising to record highs and slowing economic growth. This is predicted by Jeremy Weir, head of Trafigura – one of the largest commodity traders in the world, reports the Financial Times. European embargo on Russian oil: What will happen to prices?
According to him, energy markets are currently in a critical state, as sanctions against Russia’s oil exports are exacerbating already limited supplies created by years of underinvestment. Huge demand is yet to raise the price of oil
“We are in a critical situation. I really think we have a problem in the next six months … once we get to these parabolic states, markets can move and jump a lot,” Weir warned at the FT Global Boardroom conference.
The parabolic movement of markets is usually observed when the rising price suddenly jumps to unprecedented levels, mimicking the right side of a parabolic curve.
$ 150 a barrel?
Weir believes it is likely that oil prices will rise to $ 150 a barrel or more in the coming months as supply chains tighten and Russia tries to divert its oil exports away from Europe. China is increasingly greedily consuming cheap Russian oil
Brent crude oil, an international oil currently trading at about $ 120 a barrel, peaked at an all-time high of $ 147 a barrel on the eve of the 2008 financial crisis.
Trafigura’s chief executive is another to warn that the economy has not yet experienced the worst of the energy crisis. There is very little chance of lower prices, as global supplies are already limited and are likely to become more scarce if Russian production falls further. Oil and fuel prices will remain high for a long time
Jamie Dimon, head of the largest bank in the United States – JPMorgan, warned last week that prices could reach $ 150 or $ 175 a barrel this year. Goldman Sachs experts predict that oil could exceed $ 140 a barrel in the third quarter, when the summer driving season in the United States is at its peak.
OIL MARKET: Goldman Sachs tells clients it expects Brent crude to average $140 a barrel between July and September (and because US strength and sky-high refining margins, consumers will ‘experience’ retail prices like if Brent has surged to ~$160 a barrel) #OOTT pic.twitter.com/2q4oxFDlIt
– Javier Blas (@JavierBlas) June 7, 2022
Rising prices for other commodities, including metals such as copper and lithium, are also likely to affect global economic growth and may eventually cause a slowdown to curb demand. “If very high energy prices are reached over a period of time, this will ultimately lead to the destruction of demand. It will be problematic to maintain these levels and continue global growth,” Weir said.
Production is not enough
Russian oil production has already fallen by as much as 1.3 million barrels a day – or more than 1% of global demand – and the country’s production of refined diesel and gasoline products has also fallen by a similar amount, the trader said. The Achilles’ heel of Russian oil
There are risks that Russian production will fall further, as Europe has banned maritime imports of Russian oil and, due to the imminent ban on ships carrying Russian oil, will have access to EU and UK insurance markets. The West is dealing a fatal blow to Russian oil
Saudi Arabia led the OPEC + alliance, agreeing to slightly accelerate the increase in oil production last week, but prices continued to rise. OPEC + raised production by 50% above expectations, but oil remains high
Trafigura was the largest exporter of oil cargo at sea, coming from the Russian state oil giant Rosneft before the war in Ukraine. Russia used to account for 6% of the global commodity trader’s business, which has largely suspended its deals in the country. Large buyers of Russian oil fail to obtain bank guarantees
Trafigura transported only a “limited” amount of authorized refined products from Russia, stopping all trade in Russian crude oil. The company has frozen its investment in Rosneft’s huge Arctic oil project in the Arctic.
So far, there are almost no signs of a slowdown in oil demand, although diesel and petrol prices are already reaching record levels due to limited refining capacity worldwide, as the economy is still growing steadily and consumers are saving after lockouts due to Covid in recent years. . The bad news: We’re already buying $ 250 a barrel of oil
The decommissioning of old refineries and the lack of investment in new capacity meant that refined products had to be delivered much farther to reach customers. The loss of supplies from Russia, a major refined producer that sold large quantities of diesel directly in Europe, has exacerbated the situation. Fuel prices in Bulgaria continue to rise
Oil supplies now have to travel much longer distances, which is much less efficient and problematic, the trader warns.
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