ISLAMABAD: The prices of Brent crude, OPEC oil, WTI and other fuel oil are melting down sharply in the international markets on Wednesday morning. WTI Crude fell below $104/barrel, Brent plunged to $109 while OPEC basket price skipped below $114 per barrel on Wednesday at 1:00 sharp noon (PST), mainly because of resurgence of the COVID pandemic, which would dampen global demand and consumption in the coming weeks.
In the last few days, the crude oil prices have dropped by at least $11 per barrel. Resurgence of Covid-19 in different countries caused a much-needed blow to the international crude oil prices. If this trend goes on for another few days, the crude oil prices would skip below $100 per barrel. Before Russian invasion of Ukraine (Feb 28), the crude oil prices were fluctuating around $84/barrel, which shot up to $126 in just few weeks after the Russia-Ukraine war.
If the Covid pandemic got further momentum in weeks ahead, it would dampen global oil demand projected by the IEA and other organizations.
For example, the IEA said that the global oil demand will accelerate in 2023, with demand averaging a record 101.6 million barrels per day _ exceeding pre-COVID levels. The International Energy Agency (IEA) has disclosed this in its first outlook for 2023, released on June 16.
“While higher prices and a weaker economic outlook are moderating consumption increases, China will drive gains next year with its growth pacing up from 1.8 mb/d in 2022 to 2.2 mb/d in 2023,” the IEA said.
In 2023, global oil supply may struggle to catch up with demand as sanctions on Russia would curtail more supply when they officially enter into force at the end of this year, IEA added.
“Global oil supply may struggle to keep pace with demand next year, as tighter sanctions force Russia to shut in more wells and a number of producers bump up against capacity constraints,” the IEA said.
Supply from non-OPEC+ producers will lead output increases through the end of next year, while OPEC+ supply could drop with full-force embargoes on Russian oil in the West and producers outside the Middle East struggling to increase production, according to the agency.
OPEC+ is set to unwind all the record cuts it made at the start of the pandemic, but this will erode the spare capacity cushion globally, the IEA noted.
Refining capacity—which has dropped by some 3 million bpd since COVID—is expected to rise by 1 million bpd this year and 1.6 million bpd next year, per the agency’s estimates.
“Nevertheless, product markets are expected to remain tight, with a particular concern for diesel and kerosene supplies,” said the IEA.
“OECD industry stocks of middle distillates have fallen by 25% since January 2021 to their lowest levels since 2004. That very limited cushion is driving middle distillates prices to record highs, with a knock on effect for other products which could cause more pain at the pump just as pent-up demand is unleashed during the peak driving and summer cooling season,” the agency added.