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Oil has reached $90 per barrel on Wednesday, which is the first time since 2014. On Wednesday, it was up 2% and the rise comes due to increasing concerns of a shortage in the coming months due to rising political tensions between Russia and Ukraine and the Middle East.
During lockdowns, the demand for oil fell significantly and was trading below $20 a barrel in 2020, but has since rallied with the return of economic activity. As of 9am AEDT, Crude Oil was trading at around 89.98 per barrel.
Ukraine is a transit hub for oil and gas between Russia and the European union with 11.1 metric tons exported through the country in 2021. Russia is also one of the world’s largest oil exporters and energy market prices have also risen on the basis that supply to Europe could also be disrupted in an already tight market.
The U.S is also speaking currently with major energy producer countries and companies around the world over a potential diversion of supplies to Europe. There are even talks of the U.S threatening to halt the opening of a key pipeline that would send Russian gas to Western Europe, that’s if Russia invades Ukraine. Russia has denied it is planning an attack, although there are tens of thousands of Russian troops on the border and escalated fears of an invasion.
Earlier this month in the Middle East, rebels launched a deadly drones and missiles attack on a United Arab Emirates oil depot. The Saudi-led government, that included the UAE, retaliated with several air strikes which caused deaths and a four-day internet outage.
Also fuelling these concerns is the difficulty encountered by the OPEC+ which works with the petroleum exporting countries to meet increase supply of 400,000 barrels per day. OPEC missed its target last month in December due to limiting supply due to the COVID pandemic. OPEC+ nations only managed two thirds of their stipulated increase with Nigeria, Angola and Russia all coming up short.
Covid-19 lockdowns sent oil demands crashing during the pandemic. Now though, as economies start to get back to life again, demand is increasing. OPEC, in its latest market report, forecast global oil demand to increase by 4.2 million barrels a day this year.
It is predicted by analysts at Goldman Sachs that oil will exceed $100 a barrel in the third quarter of 2022, even suggesting as high as $105 by Q1 2023. Either way, it now looks like that consumer will have to get used to paying more for energy prices and at the pump for the foreseeable future.
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