Crude oil has already gained 10% since the start of the year and has yet to improve, Vitol’s head of Asia told Bloomberg in an interview.
“These prices are justified,” said Mike Muller. “A strong offset is entirely justified.”
The executive added that unlike natural gas, the high price of which has already led to lower consumption by some industrial users, oil has not yet reached this price level.
The latest in the gas sector “reminds us that people will refrain from buying expensive energy at some point,” Muller said during an industry webinar, adding: “The question is know when it affects the oil market”.
Crude oil prices have posted four consecutive weeks of gains, the longest winning streak since October, evidence that the demand recovery remains robust as fears over the Omicron effect fade.
News that China will release oil from its strategic reserve next month had the potential to disrupt the rally, but did not as Brent crude hit a two-month high last week and traded higher. $86 a barrel at the time of writing. WTI was trading above $84 a barrel.
“People looking at the big picture are realizing that the global supply versus demand situation is very tight and that’s giving the market a solid boost,” senior analyst Phil Flynn told Reuters. of the Price Futures Group last week.
Meanwhile, according to Vitol’s Muller, the White House may decide to release more crude oil from the Strategic Petroleum Reserve, in addition to the 50 million barrels announced in November last year.
“The market is saying, ‘More, please,'” Muller said, as quoted by Bloomberg.
According to traders polled by Reuters, there is a strong appetite for future oil supply ahead of spring and summer, otherwise known as driving season in the northern hemisphere. There is also an element of anticipation of an even tighter supply.
“With spring and summer on the horizon…people are gearing up to take advantage of a strong market,” one trader said.
“I think it’s more about trying to get ahead of the tightness they think is coming… getting back to a ‘herd of lemmings’ market dynamic,” said another.
By Irina Slav for Oilprice.com
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