The price of Brent oil hit a seven-year high on Tuesday, boosted by supply disruptions in Libya and Nigeria among others, and by a pick-up in demand, despite the Omicron variant.
The price of a barrel of Brent from the North Sea moved to 86.95 dollars after 02:10 GMT on Tuesday (+0.54%), thus exceeding its record of October 2014 (86.74 dollars).
It had already caught up to its October 2018 peak the day before. The barrel of West Texas Intermediate (WTI) for delivery in February rose for its part by 0.94% to 84.61 dollars around 02:15 GMT.
Several factors are contributing to this rebound, including production disruptions "
in Libya, Nigeria, Angola, Ecuador and, more recently, in Canada due to extreme cold
", according to Exinity analyst Hussein Sayed.
“
Markets remain focused on the delicate balance between supply and demand, which seems to have a rather large impact on price fluctuations throughout the post-pandemic economic recovery
,” notes Walid Koudmani, analyst at XTB.
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Nigeria, for example, has been producing 0.5 million barrels per day less since mid-2020, or 1.4 million bpd, according to SEB figures. Angola's supply has also been declining since 2016, now reaching 1.2 million barrels per day.
Geopolitical risk is also added to the equation. If the conflict between Russia and Ukraine escalates and leads to further disruptions in Russian gas supplies to Europe, energy prices, and therefore crude oil, could rise further, some analysts say. On Friday, the United States accused Russia of having sent agents to Ukraine to carry out "
sabotage
" operations in order to create a "
pretext
" for an invasion of the neighboring country. What further heighten tensions between the two countries when a major cyberattack hit Ukraine.
Natural gas prices, which are still very high, are contributing to the rise in oil prices.
The result is "
an increase in the demand for diesel and fuel oil to replace natural gas, wherever possible
", underlines Bjarne Schieldrop, analyst at SEB.
And the Omicron variant of Covid-19, first perceived as a threat to crude purchases, is proving less severe for demand than its predecessors, not impacting fuel consumers.
OPEC in a strong position
“
Only OPEC members and their allies can lower prices at this stage by pumping more crude
,” says Hussein Sayed. “
Instead, OPEC+ countries are likely to stick to their strategy of gradually easing production cuts as they take advantage of the current high prices
,” he continues. The Organization of the Petroleum Exporting Countries (OPEC) and its partners (OPEC+) are indeed announcing month after month marginal increases in their extraction targets, and are struggling to achieve them, which should not make it possible to meet needs.
Saudi Arabia had asserted earlier this year that compliance with the agreement and the caps was essential.
In other words, members with spare capacity cannot and should not step in to compensate for the lack of production of members who are unable to meet their caps.
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“
OPEC+ output gaps are set to widen, with Russia the next big deficit driver
,” predicts Joel Hancock for Natixis. According to him, the growth in oil supply outside OPEC+ and outside the United States being “
relatively weak
”, it will be necessary “
to call on American shale oil to meet the expected growth in consumption
”. During the pandemic, the plunge in crude prices had pushed into the insolvency of shale oil drilling companies, the cost of production of which is much higher than the light oil drilled, for example, in Saudi Arabia.
Many analysts now expect crude prices to rise above $90 a barrel, or even the $100 mark.
According to Hussein Sayed, “
what seemed impossible a few months ago now has a good chance of happening
”.