Latest Updates on Global Oil Prices

Oil Updates: Get the latest on this and Russian oil before you start trading commodities with iFOREX as CFDs.

Latest Updates on Global Oil Prices

With effective vaccines in their second year of progress and economies re-opening, oil demand was strong coming into 2022 and, in the first week of the new year, prices hit a seven-week high-point. One reason was the limited supply coming from OPEC (the Organization of Petroleum Exporting Countries). Russian oil had also provided low volumes in the previous month. Another reason was the freezing weather in North America which slowed down production in West Texas and North Dakota. Add to that the military unrest in Libya which lowered output by 30%.

Near the last week of the month, oil had been gaining for five consecutive weeks, riding on the back of strong demand and supply pressures. Russian oil supply was also surrounded by a question mark because a conflict with Ukraine was dawning. Brent crude was at just below $88 a barrel, but the Bank of America predicted prices of $120 by summer. The day before the invasion, oil prices dropped due to news that the US planned to open its oil reserves to increase supply. A potential agreement between the USA and Iran might have released an extra million barrels a day to the markets, further easing supply worries.

Early March saw oil prices rocket to their highest since 2008 because of concerns that Russian oil supplies would be held back due to the conflict. On March 10th, however, New York oil futures fell 2.5%, apparently motivated by the huge spike in US inflation and partially due to the war, “Which could lead to crude demand destruction”, said Ed Moya of Oanda. OPEC, for their part, were refusing to pump up production, claiming that high prices were caused, not by a lack of supply, but by the Ukraine conflict. High gasoline prices were pressuring consumers in the US and Europe. If you’re about to start trading commodities with iFOREX as CFDs, let’s learn about the key forces that move Russian oil prices, and consider how future prices might look.

What Drives Oil Prices?

First, let’s recap what may affect oil prices, starting with two of the most prevalent: natural disasters/global events and war. When the Covid-19 pandemic emerged in 2020 and led to travel restrictions, oil demand sunk. At the same time there was too much supply coming in from Russia and OPEC, which further dragged on prices. A war like the one in Ukraine, on the other hand, causes traders to worry about supply flows, which can push up both demand and prices.

When traders send in their bids for oil futures contracts – guided by their impressions of future supply and demand – oil prices are shaped. OPEC, which unearths 40% of the world’s crude oil, therefore packs clout in determining prices. A government’s choice to release oil from its reserves would exert a similar effect. A good example came in early 2012, when traders saw headlines that read something like ‘American oil is below $97 a barrel’, which came as a result of the high availability of oil and despite US sanctions on Iran, which threatened to put a squeeze on supply. One year later, the news was again that American oil is below $97 a barrel, this time because of hopes of oil flows from Iran following restarted talks with the US.  

What Will Be the Key Drivers Going Ahead?

A crucial factor will be the extent to which OPEC can raise its production levels, and the obstacles they face  in doing this include a lack of investment and technical challenges, in the opinion of Pavel Zavalny of the Russian Duma Energy Committee. The strength of the US dollar will also play a role, since oil prices move inversely to the American currency. Another key point is whether nations in Europe follow the lead of the US and UK in banning imports from Russia. If this were to happen, companies like Rystad Energy say oil could reach $240 a barrel by the summer.

After new atrocities were discovered in Ukraine in early April, the EU began discussing this in earnest, pushing oil prices over $100. By the end of the month, though, the destruction of demand in China by the Covid outbreak was “The number one issue in the market right now”, in the words of Bob Yawger of Mizuho Securities, and prices fell below that mark.

Marching Forward

Still, as May approached, the US oil benchmark had gained a considerable 35% so far in the year. However, with no clear resolution in sight for the Ukraine conflict and mounting sanctions on Russia, we may have months of volatility to look forward to, presenting both opportunities and risks for those who’d like to start trading commodities with iFOREX as CFDs. But before you start trading commodities with iFOREX as CFDs, stay tuned to crucial news updates on the progress of Chinese lockdowns developments in EU sanction plans, and OPEC decisions, all of which could affect the price of oil.

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Steve has been living in Saudi Arabia since 2013 and writing about Saudi rules, regulations, guides, and procedures since then.