Oil Price Steadies After Major Falls; May Still Drop?

Oil Price Steadies After Major Falls; May Still Drop?

/ Oil & Gas / Thursday, 07 July 2022 10:12

Oil prices rose from their previous session lows as investors focused on tighter supplies amidst worries of weak demand in a looming global recession. Market watchers see this upward trend of oil prices being a result of "stochastic positivity."

As of this writing, West Texas Intermediate (WTI) stood at $99.25 while Brent Crude was at $101.4 per barrel.

Earlier, Brent crude fell to $100/bbl while WTI crude closed at $99.50/bbl, the lowest since April 25 and the first close below the $100/bbl level in over a month. WTI had witnessed a 10% drop to $97.43 before rebounding slightly. Meanwhile, front-month Brent crude had fallen further, losing 9.4% to $102.77/bbl, its lowest settlement since May 10.

Citigroup Inc analysts predict crude oil can drop to $65 a barrel by year’s end and to $45 by end-2023 if a global recession weakens oil demand. Conversely, the OPEC+ producers are already under pressure to pump more oil, even at the risk of exceeding their maximum output capacity.

The global economy is reeling under higher oil prices as a result of the tight supplies brought on by the      Russia-Ukraine war. Furthermore, additional oil supply disruption is expected as the Caspian Pipeline consortium (CPC)–a system which moves oil from Kazakhstan to the Black Sea via one of the world's largest pipelines–has been ordered by a Russian court to suspend activity for a month. CPC exports about 1% of global oil supplies.

According to data and sources cited by Reuters, more than 5 million barrels of oil from US emergency reserves released to lower domestic fuel prices were subsequently exported to Europe and Asia last month despite US gasoline and diesel prices currently reaching record highs.

Meanwhile, the price of the last reported OPEC basket of thirteen crudes stood at $114.30 a barrel, according to OPEC Secretariat calculations.

Separately, the push for renewable energy sources has been gaining ground against the backdrop of high oil market volatility and geopolitical uncertainty     .

The global maintenance, modification and operations (MMO) market for the renewable and low-carbon energy industries is set to almost quadruple from $63 billion to $244 billion by 2030, according to Rystad Energy research.

Annual MMO spending, including in oil and gas, will surpass $600 billion in 2030, up from pre-Covid value of $367 billion in 2019.

Total expenditures originating from fossil fuel industries such as oil and gas are set to drop from 82% in 2019 to 60% in 2030 as renewables and low-carbon energy sources claim a growing share. However, the combined spending in upstream, midstream and downstream oil and gas industry aspects is also expected to rise from $303 billion in 2019 to $364 billion in 2030, the research notes.

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