(London) Oil prices resumed their rise on Wednesday, boosted by sustained demand in a context of tighter supply with the European embargo on most Russian crude and OPEC + which should not relieve the market.
Posted at 6:55 a.m.
Around 5:40 a.m., a barrel of Brent from the North Sea for delivery in August, which is the first day of use as a benchmark contract, took 1.50% to 117.33 dollars.
The barrel of American West Texas Intermediate (WTI) for delivery in July, climbed 1.47% to 116.35 dollars.
The agreement on a European Union embargo on Russian oil, won overnight from Monday to Tuesday after weeks of blocking Hungary, “raises fears of a summer shortage of fuel” and a tightening of the supply of crude, in an already tight market, said Stephen Brennock, an analyst at PVM Energy.
At the same time, “expectations of strong summer demand in the Northern Hemisphere and the easing of Chinese health restrictions should help propel global oil consumption”, continues the analyst.
Shanghai, the economic capital of China, on Wednesday lifted the most significant anti-COVID-19 restrictions imposed for two months on its 25 million inhabitants, a further step towards an end to the containment which infuriates the population and strangles the economy.
At the same time, OPEC +, which meets Thursday by videoconference, still seems to be resisting Western pressure to accelerate its increases in black gold production. The members of the G7 on Friday underlined the “key role to play” of OPEC + in the face of “tightening of international markets”.
“This latest attempt by the West to temper energy (price) inflation has fallen on deaf ears, once again. Instead, Saudi Arabia has displayed its allegiance to Russia, another OPEC+ producer,” Mr. Brennock said.
According to an article in the Wall Street Journal published Monday evening, members of the Organization of Petroleum Producing Countries (OPEC) are however studying the possibility of removing Russia from the production plan decided last July with their allies of the OPEC + agreement.
“Such a decision would effectively end the group’s supply agreement prematurely and pave the way for an unlimited increase in production,” comments Stephen Brennock.
“The apparent increase in shuttle diplomacy between the United States and Saudi Arabia lately could indicate that the change within OPEC + may be close,” said Bjarne Schieldrop, analyst at Seb.
“This would allow Saudi Arabia and the United Arab Emirates to use their spare capacity and increase production,” he continues.
Increasing the supply of oil from these two countries “will allow the West to implement stricter bans, which will lower Russian oil exports without causing the price of oil to explode”, argues- he.