Explanation: Why oil prices are at a 7 year high. All you need to know

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Oil prices are trading at their highest level since 2014, thanks to weak supply and a faster than expected recovery in demand for oil. Brent was at $ 82.47 a barrel Wednesday morning and WTI at $ 78.84. Prices hit a multi-year high after OPEC and non-OPEC members – collectively known as OPEC + – decided on Monday to stick to their plan to gradually increase oil production. At the meeting on Monday, OPEC + members decided to continue their July decision to increase oil production by 400,000 barrels per day each month until at least April 2022.

The Oil Cartel (OPEC) has come under tremendous pressure from some countries to dramatically increase oil production, as economic activities around the world pick up sharply, resulting in high demand for oil. India, one of the biggest consumers of oil, had also pushed OPEC to consider a larger offer to ensure comfortable prices for both consumers and producers.

In addition to rising demand, soaring gas prices, which have soared by more than 300 percent, are making matters worse. Soaring gas prices are prompting many countries to turn to fuel oil and other crude products for all industrial needs, increasing global demand for oil.

In 2020, when the Covid-19 pandemic crippled global economies, economic activity and demand for oil were at an all-time low. But now, with the decline in Covid-19 cases, the vaccination process has boosted sentiment in the market and demand for crude oil is rebounding. However, many analysts attribute an environmental, social and governance push, a sharp reduction in capital spending by oil companies, the scarcity of gas in Western Europe and a sharp rise in gas prices as some of the factors leading to this crisis. .

“The required investments and capital expenditures in the oil and gas sector have not taken place as many companies have decided to keep their capital investments and capital expenditures on hold. Some companies have invested funds intended for the expansion of oil and gas in the renewable energy sector, ”said Narendra Taneja. , Chairman of the Delhi-based Independent Energy Policy Institute.

Also Read: India to Introduce Flexible Fuel Vehicles Soon to Increase Ethanol Consumption

Is $ 100 a barrel a possibility?

Yes, experts believe that from here the price of oil will only increase. Taneja believes that if we get the desired results from the ongoing vaccination process around the world, oil prices are sure to rise. He believes that with the vaccination reaping the desired results in economies like the United States, India, Europe, etc., oil prices will soar.

“As far as my point of view, I think this winter oil prices would be under tremendous pressure. And oil could stabilize around $ 80 a barrel this winter,” Taneja said.

According to him, in 2022, the price of oil will only go in a direction that is north and in 2023, oil prices will be in the order of $ 100 per barrel on a sustained basis.

Prashant Vashisht, Vice President, Corporate Ratings, ICRA, highlighting crude oil prices, said: “Longer term, oil prices are expected to be trending north due to declining capital spending by companies. upstream companies, including shale companies. , in the short term, oil price levels would critically depend on OPEC + production and supply levels and global demand growth. “

Read also: Cairn to produce 50% of India’s oil and gas in 2-3 years: Anil Agarwal

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