Oil prices look set to hover around the $100 per barrel mark in the foreseeable future. This is mainly due to concerns about Russian supply disruption, reduced demand in China and reluctance among major oil producers to boost production capacity.
The two leading international benchmarks showed an upward trend in April 2022. This reflected their fifth consecutive month of increases;
Brent crude futures rose 1.9% during London’s intra-trading day and West Texas Intermediate rose 1.3% in late trading.
Analysts suggest the driving force behind this buoyancy in crude prices is ongoing supply fears.
This is amplified by the possibility that German and other EU nations will introduce an embargo on Russian oil. The market is preparing for the arrival of supply routes being cut off imminently.
Oil Production Targets
A deal reached in 2021 among the Organisation of the Petroleum Exporting Countries (OPEC) aims to increase output targets by 432,000bpd every month to September.
This is to unwind its remaining production cuts, and this planned output increase is to go ahead for May.
However, major consumers have been pressing the organisation to boost this output more quickly, particularly as Western sanctions are set to hit Russia.
The group has been struggling to produce at the targets it agreed, and this trend is unlikely to change.
It fell short of its production targets for March by 1.45 million barrels per day.
In its most recent report, OPEC lowered its demand forecast for 2022. It now expects oil demand growth of 3.7 million barrels per day.
This is 400,000 barrels per day less than its original growth forecast for 2022, and will average at 100.5 million barrels per day.
The first quarter of 2022 showed strong demand as economic recovery accelerated in the wake of COVID-19 restrictions.
All eyes will be on China as it shows no signs of easing its strict lockdown anytime soon. These measures have impacted its economy and global supply chains.
As the world’s biggest crude oil importer, China’s lockdowns are having a significant impact on oil demand.
Consequently, crude’s rally could stall with prices at around $100 per barrel this year, with the biggest factors being the supply disruption from the Ukraine war and China’s COVID lockdowns.