Jakarta, CNBC Indonesia – World crude oil prices this week recorded a fairly severe correction, although in a daily period, throughout this week world crude oil prices tend to be volatile.
The price of Brent contract oil fell 2.17% compared to last week’s closing position to US$ 73.52/barrel. Meanwhile, West Texas Intermediate (WTI) contract oil fell 1.13% to US$ 70.86/barrel this week.
On a daily basis, world crude oil prices tend to be volatile. At the beginning of this week, the two types of world benchmark crude oil had been corrected for two days. However, on Wednesday (15/12/2021) and last Thursday, the price was direct rebound to the green zone. But on Friday trading last week, the price corrected again.
It seems that the correction in crude oil prices is only for technical reasons. Understandably, the price of the black gold was previously in an upward trend, so investors were tempted by the money and eventually the oil contract experienced selling pressure.
Looking ahead, it looks like the outlook for oil prices remains bright. The Organization of the Petroleum Exporting Countries (OPEC) believes oil demand will be high.
In its latest report, OPEC estimates that the average demand for oil in the first quarter of 2022 is 99.13 million barrels/day. Up 1.1 million barrels/day from the previous projection.
According to OPEC, the emergence of the corona virus (Covid-19) variant of Omicron, will not have a significant impact like the Delta variant. The effects of the Omicron variant are thought to be mild and temporary.
“The economic recovery will continue in the fourth quarter of 2021 and will continue in the first quarter of 2022. The impact of the Omicron variant is likely to be mild and temporary, as the world is better prepared to deal with Covid-19 and the various challenges that accompany it,” said OPEC’s monthly report.
For the whole of 2022, OPEC estimates that world oil demand will increase by 4.15 million barrels/day from this year. In the third quarter of 2022, world oil demand will exceed 100 million barrels/day, returning to pre-pandemic times.
On the other hand, the United States (US) Ministry of Energy sold 18 million barrels of crude oil from (SPR) last Friday. The sale is the first step in a plan to release 50 million barrels that Washington announced last month. The remainder will be released over the coming months via the exchange, which must be returned to the SPR with interest.
The US is embracing other consumer countries such as China, India, and South Korea. All three are not members of OPEC.
Referring to data from the Energy Information Administration (EIA), the US and its group produce 15.76 million barrels per day (Mb/d) of crude oil. This amount is equivalent to 20.37% of world production. Meanwhile OPEC produced 28.87 Mb/d, equal to 37.32% of world production.
The first exchange was with EXXon Mbil Corp, the largest US oil company, with 4.8 million barrels, the department said.
“As DOE moves forward with the sale, exchange requests will continue to be received from interested parties and approved as appropriate to address supply disruptions,” the department said.
“The (oil reserves) release will only provide a short-term fix for the structural deficit and will create a clear upside risk for our 2022 price forecast,” Goldman Sachs wrote.
A more fundamental issue is that investment in oil production is hampered by environmental, social and governance (ESG) concerns and concerns about global warming.
Banks as a source of funding also provide loans with higher interest rates for oil than green energy projects.
“The investor damage caused by the collapse of oil producer capital over the past seven years is now being exacerbated by the allocation of (funds to) ESG,” Goldman said.
The US and OPEC + themselves had “battles” about increasing production. The US believes that OPEC+ can suppress world oil prices by increasing production.
OPEC+ disagrees on the grounds that the current production volume will leave the crude oil market in surplus next year.
The US has an interest in reducing gasoline prices due to soaring world oil prices. High gasoline prices make US inflation very high and make the economy hot.
“The president rightly believes that Americans deserve help now and has allowed the use of SPRs to respond to market imbalances and reduce costs for consumers,” said Energy Secretary Jennifer Granholm.
CNBC INDONESIA RESEARCH TEAM
(chd / chd)
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