Business News Asia
In recent weeks, a number of measures have been taken to bring oil prices down again and counter rising inflation. The International Energy Agency (IEA) and its member states have agreed to once again release strategic oil reserves onto the world market in order to increase supply and thus lower oil prices somewhat. This time, 120 million barrels are to be released, 60 million of which will come from the U.S. alone.
In addition to the IEA, the U.S. itself will also release even more oil reserves. According to President Biden’s plan, a total of 180 million barrels of crude oil will be released, which includes the 60 million, from the agreement with the IEA.
In addition, parts of China are still under strict lockdown. Currently, Shanghai, a city of 25 million people, has been under lockdown for two weeks. This affects the oil demand in China, the world’s largest oil importer.
Soberly speaking, we can conclude that the oil price is still in the triple digits despite the measures. Both crude oil benchmarks have this week again a strong jump upward could make. Brent was able to gain 13.32% to $111.32 per barrel this week. Year-to-date, Brent prices have already gained 43.8%. WTI crude oil rose 12.99% this week to $106.54 per barrel. Year-to-date, the price has already gained 41.98%.
One important point keeping oil prices up at the moment is the sanctions imposed on Russia. The EU is currently considering following the U.S. in imposing sanctions on Russian crude oil. The last sanctions imposed by the EU included a ban on imports of Russian coal. In addition, refiners and traders are currently avoiding Russian oil even without sanctions. If the statements of some politicians are to be believed, the Ukraine war will continue until 2022. This means that in the long term, oil prices can be expected to stay in the triple-digit range.
OPEC Secretary-General Mohammad Barkindo said this week after meeting with EU officials that OPEC cannot replace the 7 million barrels of crude oil from Russia. Moreover, OPEC warns that current prices are not driven by market fundamentals, but are purely political. In other words, policymakers are knowingly accepting high oil prices, says the statement. Possibly also as a way of exerting pressure to reduce oil demand, since high oil prices usually result in falling demand.