Oil Prices Still Heading Towards 2023 Highs
After restricting oil exports under an agreement with Saudi Arabia and some other OPEC+ countries, Russia is banning the export of gasoline and diesel fuel to meet the demand of its own farmers struggling for a grain harvest exceeding 130 million tons.
The price of oil continues to rise. On Thursday, September 28, it remained close to 2023 record levels. Prices for Brent, the benchmark crude oil of the North Sea, where commercial development of a new oil field Rosebank is about to begin, reached $97.67 per barrel, which is the highest level in history since the summer of 2022, then fell to $95.80 (-0.77%). North American West Texas Intermediate (WTI) also lost 1.2%, falling to $92.62 per barrel, following a jump the previous day when prices slightly surpassed the “psychological” mark of $95 per barrel.
The rise was primarily driven by concerns about new restrictions on global crude oil supplies by OPEC+. Saudi Arabia, Russia, and other major oil producers maintain coordinated and disciplined control over supply, helping to keep prices high. In its latest economic report, the European Bank for Reconstruction and Development (EBRD) expressed the view that “high oil prices contributed” to the current acceleration of the Russian economy during the war and sanctions.
In addition to limiting crude oil exports, for this month Moscow also banned exports of petroleum products, such as gasoline and diesel, to meet rising domestic demand, primarily from farmers. They are taking advantage of the unusually warm period to stock 130 million tons of grain in bins before the start of the lengthy autumn rains. In September, the average daily temperature in Moscow and St. Petersburg hovered around 23-25 degrees Celsius, breaking some historical records dating back to 1937.
Oil prices are expected to rise further by the end of the week, thanks to data showing a drawdown in inventories in the United States, where President Joe Biden’s administration is tapping strategic reserves to try to slow rising consumer prices.
As to consumption in the coming years, OPEC estimates that oil demand should peak by 2045, with oil consumption expected to be approximately 109.8 million barrels per day. However, analysts at McKinsey disagree with OPEC’s estimates: after more than 30 years of stable growth by more than 1% per year, demand, they say, is slowing. McKinsey believes the peak could be reached as early as 2029. According to Bloomberg, oil demand will peak even earlier, by 2027. In other words, it’s highly probable that starting from 2030, the dynamics of demand and the logic of prices are destined to undergo significant changes.
