Analysts say that OPEC+’s abundant supply and large spare capacity are easing the impact of the conflict in the Middle East.
On April 19, Brent and WTI crude oil prices soared after news of Israel attacking Iran, due to concerns that oil supplies in the Middle East could be disrupted. At one point, both oils rose nearly 4%. Brent increased to 90.75 USD, while WTI increased to nearly 86 USD per barrel.
However, the market then went down again, closing the session at the same level as the opening price. Above ReutersTamas Varga – analyst at brokerage firm PVM explained that up to now, the conflict in the Middle East has not had a major impact on oil supply in the world’s leading oil producing region.
“In the absence of supply and production problems, it will be difficult for the market to set a new peak like last weekend,” he said. Last week, the price of Brent crude oil last week at one point reached 92 USD per barrel – the highest since October 2023.
Brent oil prices soared at the beginning of the morning session on April 19, then gradually decreased towards the end. Graph: CNBC
Some oils are even showing signs of price decline. On the North American market, Forties oil – light oil in the North Sea – is currently only 0.35 USD higher than Brent. This number is down from a difference of 2.3 USD in February, financial services firm LSEG said.
Global supply is currently abundant as refineries in many places are undergoing maintenance before the summer, oil production in the US is increasing and some countries are no longer interrupting production. The current situation is reversed compared to February.
Output in Libya has recovered, as the largest oil field returned to operation after a strike in January. US crude oil exports to Europe in the first 4 months of the year were also higher than the same period last year, data showed. of Kpler said.
Even Nigeria – Africa’s leading oil exporter – has not yet found a buyer for the oil that will leave the port next month. Some energy companies in this country have had to reduce prices. Source of Reuters said Nigeria still has at least 35 out of 49 unsold oil lots.
Besides, energy analysis firm Rystad Energy believes that the reasonable price of Brent is only about 83 USD per barrel, considering fundamental factors. Therefore, the current price of $87 “already reflects geopolitical risks,” said analyst Jorge Leon.
“Despite the latest attack, Rystad Energy’s view remains that if tensions in the Middle East do not escalate significantly, the geopolitical risk factor in oil prices will stabilize and gradually decrease,” he said.
The Organization of the Petroleum Exporting Countries and its allies (OPEC+) remains abundant production space, along with the fact that supply has not been affected, “also helps control oil prices”, HSBC said. The bank also believes that “current prices reflect enough geopolitical risks”.
The price of Brent oil delivered in May is currently higher than Brent oil delivered in November, due to tight supply. However, the price difference is gradually narrowing, currently only 3.5 USD per barrel – the lowest in the past month. This means scarcity is decreasing.
The fact that OPEC+ still has plenty of room for oil production makes the scenario of supply disruption unlikely. The International Energy Organization (IEA) estimates that OPEC+’s spare capacity is up to nearly 6 million barrels a day, equivalent to 6% of world demand.
“Price fluctuations against supply/demand risks will be softer if investors know the market still has buffers to rely on,” Varga concluded.