The price of oil today hit a seven-year high, driven by supply disruptions, geopolitical tensions and rising demand, despite fears of an advance of the novel coronavirus’s omicron variant.
A barrel of North Sea Brent was trading at USD 87.26 (+0.9%) at 4:50 GMT (1:50 GMT), reaching a high since October 30, 2014, when it reached USD 86, 74.
A barrel of WTI (West Texas Intermediate) followed the trend, rising to $85.66, a level not seen since 2014.
Several factors contribute to this increase. On the one hand, the interruption of production “in Libya, Nigeria, Angola, Ecuador and, more recently, in Canada, due to the extreme cold”, explained Hussein Sayed, an analyst at Exinity.
Production declines in countries like Angola and Nigeria, which contribute half a million barrels a day less than in mid-2020.
“Markets remain focused on the delicate balance between supply and demand, which appears to have a very important impact on price fluctuations during the post-pandemic economic recovery,” said Walid Koudmani, an analyst at the company XTB.
Geopolitical tensions between Russia and Ukraine also play a role, which could disrupt gas supplies to Europe, or the Persian Gulf, where Yemen’s Houthi rebels have claimed an attack on oil supply facilities in the United Arab Emirates.
These incidents “raised prices even higher” for oil, said Warren Patterson, an analyst at ING Warren.
In parallel with these supply pressures, demand continues to increase as the global economy gradually returns to its pre-pandemic level of activity, despite concerns about the emergence of the omicron variant.
In addition, the price of natural gas, which is still at a high level, contributes to the increase in the price of oil, as it causes an “increase in demand for diesel and fuel to replace natural gas”, says Bjarne Schieldrop, from consultancy SEB .
Experts point to OPEC (Organization of Petroleum Exporting Countries) as a solution to this escalation, but its members do not want to hastily reverse production cuts enacted when the pandemic hit, when prices plummeted.
“Only OPEC members and their allies can push prices down by pumping more oil. But instead they are likely to stick with their strategy of easing production cuts as they benefit from the current high prices,” Hussein Sayed said. .
OPEC and its allies (OPEC+) have been announcing marginal increases in their production for months that do not respond to the needs of demand.
Saudi Arabia reaffirmed this year its respect for these agreements and the importance of these ceilings.
This leads many analysts to predict that prices will continue to rise until they break the $90 a barrel, or even $100, barrier.
For Sayed, “what seemed impossible months ago is now very likely to happen.”
Goldman Sachs analysts estimate that Brent could hit $96 this year and $105 in 2023, according to a note published today.