BAKU, Azerbaijan, Sept.28
By Leman Zeynalova – Trend:
Higher oil prices may push OPEC+ to accelerate the production quota easing, Ibrahim Ahmadov, deputy head of the public relations and events department at Azerbaijan’s state oil company SOCAR, told Trend.
ICE data shows that oil prices have exceeded $80 per barrel, the first time since October 2018, while gas prices have for the first time in history rose above $1,000 per 1,000 cubic meters.
“The increasing demand and world economic growth have had bullish impact on oil prices this year. One of the factors affecting the oil price forecasts are the vaccination rate, the prospects for easing the lockdown or tightening measures in different countries. As such, there is a direct correlation between the oil price growth and the global epidemiological situation. Rapid spread of Delta variant in summer negatively affected the global economic growth forecasts and led to a short-term decline in oil prices. Currently, the views about the epidemiological situation are quite positive, which significantly affects the demand growth for oil and other products. Production decline in the Gulf of Mexico following the Hurricane Ida was another factor affecting the oil prices,” said Ahmadov.
He pointed out that the supply and demand balance in the oil market is affected by the situation in the natural gas market.
“The European gas market has been liberalized relatively recently and the major part of gas is sold under spot contracts instead of long-term oil-indexed agreements, which undermine stability and cause gas price hike. Analysts note that Russia doesn’t supply enough gas to Europe, since it needs to save considerable volumes of gas for winter. All this is happening amid the rise in prices for liquified natural gas (LNG), which has been the case since early 2021. Consequently, we see unprecedented growth in spot prices for natural gas in Europe. Many market players are expected to use oil products for energy production due to the lack or expensiveness of gas. As such, higher gas prices put upward pressure on oil demand, one of the factors paving way for higher oil prices,” said SOCAR’s representative.
Ahmadov noted that in the medium term, oil prices will depend on the global epidemiological situation and vaccination against COVID-19, climatic conditions this winter (a cold winter could further increase energy prices), the prospects for increasing shale oil and gas production in the United States, and the will and capabilities of the OPEC + countries.
“In the current situation OPEC+ may raise the issue of a quicker lifting of restrictions on oil production, which could to some extent neutralize the growth in oil demand,” he concluded.
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