Last Monday, the People’s Bank of China for the first time in several years lowered the interest rate of its medium-term loans by 10 basis points and hinted at the possibility of further easing in its monetary policy.
On the geopolitical side, despite the calming of tensions in Kazakhstan, and its oil production being restored, the situation in several other oil-producing countries has worsened.
The context of this situation implies that the OPEC+ countries will face difficulty in fulfilling the decision to increase oil production monthly by 400,000 barrels per day.
The investment bank expects that Brent prices will reach $90 per barrel in the first quarter of 2022 and will exceed $100 per barrel in the third quarter of this year.
For yet another month, OPEC’s production increase was lower than agreed levels.
It warned that the market looked tighter than previously thought, as the global supply surplus is shrinking and oil demand is on track to hit pre-pandemic levels.
Indeed, oil prices have rallied last week on a set of bullish factors and hit a seven-year high.
In the short term, these levels look quite realistic, but in the long term, they do not look stable.
A few weeks ago, the omicron variant emergence and the expected supply surplus in 2022 risked a fall in prices.
But this does not mean that prices can’t collapse at any point, for instance, against the backdrop of a new COVID-19 variant development, the conclusion of a deal between the US and Iran, or increasing production by major producers such as Saudi Arabia.
Given the speculative expectations and frequent geopolitical events, the psychological mark of $100 per barrel cannot be ruled out.
He held senior analyst positions at OPEC, IEF in Riyadh, and OPEC FUND for International Development.