HULT Private Capital Sees Brief Oil Price Hikes
HULT Private Capital reported that on Thursday, the International Energy Agency (IEA) raised its forecast for oil price demand for the remainder of 2022. The Paris-based agency, in its monthly oil report, has modified its 2022 demand outlook prediction by 380,000 barrels per day (BPD). This upgrade is on top of the IEA’s expectation for coal demand to reach an all-time high in 2022. HULT Private Capital saw a resulting increase in oil prices of over 1% on Thursday, and this growth forecast is combined with the soaring gas prices seen that have driven some consumers to switch to oil.
HULT Private Capital said that brent crude futures initially gained 2.7% o this IEA news trading, at just over $100 a barrel; however, as of August 16th, brent futures have fallen back to $92/barrel. At the same time, the U.S. West Texas Intermediate crude futures jumped 3.2%, reaching $94.87 per barrel. They, too, have since fallen and are floating in the lower $86/barrel range.
According to HULT Private Capital, energy prices have been high through the summer due to the continued supply chain issues le over from the Covid-19 pandemic and moreover the ongoing conflict in Ukraine since the invasion by Russia.
HULT Private Capital also stated that the IEA’s growth expectation was in contrast to OPEC, and that on the same day as the IEA’s report, it revised its own forecast down. OPEC sees the 2022 oil demand rise by 3.1 million; however, this is a 3.2% decrease amounting to 260,000 BPD fewer than their previous forecast.
A HULT Private Capital report stated that “Electricity and natural gas prices have soared this summer to new records, incentivizing many to switch from gas to oil in particular countries.”
Why is the price dropping?
According to HULT Private Capital, the recent climb and fall of oil prices were preceded by the rise in U.S. oil inventories and the resumption of crude oil ow via a pipeline that supplies central Europe the previous week.
The U.S. crude oil stock increase of 5.5million barrels was more than expected, and this meant a change in demand. Gasoline supplies also rose to 9.1million BPD, with demand down 6% over the past month compared to 2021. According to HULT Private Capital, the WTI front month future premium was pegged at $4.38/barrel on Thursday, the lowest since April, and it has further decreased since due to easing supply tightness.
Transneft has resumed flows on its Russia-to-Europe Druzhba pipeline and reduced global supply worries. These flows were stopped earlier in August because Western sanctions prevented Transnet from receiving transit fees.
The outlook for energy prices is good
HULT Private Capital sees physical oil prices around the world beginning to fall, in line with similar decreases in oil futures, reflecting the ease of concerns about supply disruptions. The shock seen with July’s energy prices will likely be the top. Barring any further Russian-led supply disruptions or heightened worries about a possible global economic slowdown, as the world takes a collective deep breath with increasing supplies, HULT Private Capital believes that energy prices will continue to fall.
