Geopolitics keep oil near 7½-year highs


Petrol prices at the pump are elevated across the country, driven by surging oil prices. World oil prices are edging closer to breaking the US$100 a barrel mark. In the past week, the West Texas Intermediate price for oil on the futures exchange has risen to $95.82 a barrel – the highest price since September of 2014. It is currently trading near this elevated level.

The Organisation of Petroleum Exporting Countries (OPEC) made record cuts to production last year and pledged to unwind these this year. However, so far OPEC have under-delivered. Non OPEC producers are set to lift supply and some large economies like China are expected to release strategic reserves this year, while reserves have already been tapped in the United States. The International Energy Agency (IEA) predicts global supply could reach 6.4 million barrels per day this year if the remaining OPEC+ cuts are fully unwound. This would help address supply-demand imbalances and take some of the heat out of oil prices.

However, fears of an imminent Russian invasion of Ukraine remain heightened, fuelling concerns that oil supply will be disrupted. Russia is one of the world’s largest oil producers. The conflict could mean the supply response will be slow, leaving oil prices higher for longer.

Download - 21 February 2022 Weekly Economic Outlook

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