Why “blockbuster” oil prices continue to rise

2022-05-14 0 By

According to Platts, the spot price of Brent crude oil in the UK reached $100.8 per barrel on February 16, breaking 100 for the first time since 2014.Brent crude oil futures rose above $96 a barrel at one point in the day as spot brent prices topped $100 a barrel.In recent days, the development of the Russia-Ukraine situation has become the biggest uncertainty in the oil market.Russia is the world’s leading oil and gas exporter, and a conflict with Ukraine or western sanctions would affect its oil and gas exports, which an already tight market could not absorb, JBC Energy said.With the situation so tight, oil and gas prices are likely to be volatile in the coming week.National security, production and manufacturing, science and technology and network, and finance are the four “hard power” elements that usually determine the direction of world politics, economy and society, and the rest are in a secondary or subordinate position.As a result, the turmoil in energy markets has generally had little impact on the global political economy.However, when the four main factors mentioned above touch an industry or field “from top to bottom”, there will be a huge “butterfly effect”.Kazakhstan’s oil and gas market turmoil in January, for example, was the result of national security and geopolitical turmoil.For example, the recent spike in oil prices to $90 / BBL was largely driven by changes in dollar monetary policy in recent years, and OPEC+ or U.S. shale producers have played a limited role.A few January happenings helped.In this sense, resources (energy) are the second level factor.The causes of kazakhstan’s political unrest, which broke out in January 2022, are largely clear.The main reason was that protests in mangeshetu state in the south of the country turned violent as the price of liquefied natural gas (electronically traded) nearly doubled, causing local people, who rely on it for heating and cooking in cold weather, to become angry.The middle level is due to the involvement of more than 20,000 foreign Non-Governmental organizations (ngos) and the media in Kazakhstan., the deep reason is that the independent for 30 years, due to the first President nursultan nazarbayev of the supreme authority and the foothold, the unparalleled contribution to the development of the country, the family group, use the power and influence, fully realized it, step by step, lead to the reduced into a complete “crony capitalism” countries,The resulting wealth gap in the country is staggering.A sense of hopelessness and deprivation is the main reason Mr Naylor and his family have lost power in the turmoil.Naturally, risks in Kazakhstan’s national security and domestic political situation have brought great uncertainty to the domestic and regional oil and gas market and supply security.Kazakhstan is the largest oil and gas producer and hub country in Central Asia.In 2020, it accounted for 1.8 percent of global oil reserves and 2 percent of global oil production.The famous Kasakan, Tengiz, Karacaganak and other large oil and gas fields are located in the Caspian Sea of Kazakhstan.Us and European oil majors are the biggest foreign investors in the projects.The China-Central Asia natural gas pipeline and china-Kazakhstan crude oil pipeline, which play an important role in ensuring China’s oil and gas security, either pass through Kazakhstan or originate from that country.According to incomplete statistics, since 1994, when the oil and gas market of The country was opened to the outside world, it has attracted more than $150 billion of foreign investment.One of the groups most concerned about the situation in the country following the unrest is the global oil community.It is concerned that several large oil and gas fields operated by foreign investors will suffer public shocks and pose major social security risks;There are also fears of oil spills from several cross-border oil and gas pipelines that have been damaged or shut down.Fortunately, those fears have not materialized so far.Incumbent President Tokayev took decisive steps to control the situation well.That’s the silver lining.In addition, it should be pointed out that because Russia successfully “saved” Kazakhstan at the time of crisis by sending troops through the SECURITY Gathering Organization, Russia’s political and security discourse power and influence in Kazakhstan and even the whole Central Asia region will be unprecedentedly enhanced in the future, and then there will be a change in the field of energy competition and cooperation in favor of Russia.This trend deserves attention.The first black swan to emerge at the start of 2022 in the global political, economic and oil markets is big enough.Properly managed, this “black swan” has not had a major negative impact, but it has also been a factor in higher oil prices.In mid-January, two events occurred in the Middle East that affected the international oil market.On the morning of Jan. 17, a drone and missile attack on ABU Dhabi, the capital of the United Arab Emirates, by Houthi militants in Yemen, exploded a tanker at the Musafa oil depot of ABU Dhabi National Oil Company, killing three people and injuring six others.Since 2015, a Saudi-led coalition has been bombing Yemen, and Houthi militants have frequently carried out attacks on Saudi Arabia.But for the UAE, it was the first attack since 2018 and the largest.The other was an explosion on the night of January 18 on an oil pipeline linking Kirkuk in northern Iraq to the Mediterranean port of Ceyhan in Turkey.The pipeline consists of two parallel lines that carry oil controlled by Iraq’s central government and the Kurdish regional government to the port of Ceyhan for shipment to Refineries in Europe.The pipeline will move 450,000 b/d in 2021.Iraq’s Oil Ministry said the pipeline resumed operations early On January 19 and could carry 75,000 barrels of crude oil a day.In fact, compared with the turmoil in other regions, the Middle East region will see a rare situation of “detente” in 2021. The rhetoric and gestures of regional rivals such as the United States — Iran, Saudi Arabia — Iran and Saudi Arabia — Qatar can be regarded as a rare positive trend in the security situation in the Middle East in the past decade.Over the past year, tensions between The United States and Iran have eased, and Iran’s nuclear talks have faltered.The crisis of cutting diplomatic ties with Qatar has basically ended. The momentum of detente between Arab countries and Israel has been further consolidated. The civil wars in Syria and Libya have pressed the “pause button”.There are three factors behind the easing. First, the Biden administration continues to adjust its Middle East policy, highlighting “strategic contraction”.Second, countries in the region are focusing on economic reform and green transformation, and their policies are more “inward looking”. For example, the United Arab Emirates has pledged to achieve net zero emissions by 2050 and invest 165 billion US dollars in renewable energy.Third, regional powers have reached their limits in several battlefields and are now locked in a stalemate.So neither an attack on a crude oil facility in the United Arab Emirates nor an explosion on a pipeline in Iraq, while temporarily boosting oil prices, is a significant factor in the direction of the global oil and gas market right now.It has to be said that in the context of the withdrawal of major powers and energy transition, the influence and intervention degree of the Middle East on the global oil and gas market is declining.On January 26th Brent crude hit $90 a barrel for the first time in years.In addition to sudden events, the bigger reason has to do with dollar monetary policy and oil supply and demand fundamentals, and some energy experts and oil analysts believe brent at $90 a barrel may be just the beginning.One is the weak dollar policy.In order to recover the economy and deal with the epidemic, the US adopted a weak dollar policy in the late Trump administration and the first year of Biden’s administration, which led to the continuous rise of oil prices in the two years since the bottom of the oil price in late April 2020.Although the emergence of delta and Omicron mutated COVID-19 strains has depressed oil prices, it is only a temporary phenomenon and the upward trend of oil prices has not changed.Second, idle capacity is insufficient.OPEC+ spare capacity is falling, and underinvestment is behind it.Russia’s production growth has fallen far short of expectations.Jpmorgan warned in January that Brent crude could rise to $125 a barrel as OPEC spare capacity falls to 4 percent of total capacity in the fourth quarter of 2022.Third, solid physical demand.As the US and Europe are about to lift the lockdown, the epidemic is being treated like a “big cold”.This is clearly driving up global oil and gas demand.Moreover, the break-even cost of crude oil is also rising due to inflationary trends and labor shortages, leading to a “hard lift” in crude oil prices.At present, the international oil price has exceeded 90 dollars per barrel, what is the recent trend?Now that we’ve reached $90 / BBL, we can’t be far from $100 / BBL.Indeed, fundamentals of supply and demand, inflation, and the energy transition will all push prices higher.Of course, there are those who think oil prices will fall sharply.The dollar’s next move is likely to be a “violent rise”, with the result that oil prices will fall.Disclaimer: The above content is reprinted from Sinopec and does not represent the position of this platform.National Energy Information Platform Tel: 010-65367702, email: hz@people-energy.com.cn, Address: People’s Daily, No.2 Jintai West Road, Chaoyang District, Beijing