In the wildest estimates, the price of crude oil is estimated to rise by up to 25 percent.
Oil exporting countries The OPEC+ organization’s announcement on Monday about cutting crude oil production volumes was raised one repeats the wildest estimates about the future price development of oil and fuels. According to the announcement, production is going to be cut by more than a million barrels per day.
For example, according to the estimate of the consulting company Rystad Energy, the decision to cut could raise the price of Brent reference quality crude oil up to 110 dollars for the summer. Currently, the price is at $85, so it would be an increase of up to 25 percent.
Also, a few US banks have set barrel prices of around $100 for the summer.
OP Group chief economist Reijo Heiskanen however, does not believe in such strong price increases.
“The state of the global economy is so sluggish at the moment that I don’t see a very big possibility that the price of crude oil will increase by an extraordinary amount,” Heiskanen says.
By this he refers not only to the general development of the economy, but also to the recent instability of the banking sector.
Ramble in line with Heiskanen is also the commercial director of the energy company St1 Timo Jokinen.
“When, for example, these recent banking worries came to the surface, the price of crude oil fell to around $70 per barrel,” says Jokinen.
By bank worries, he means crisis in the banking sector since Marchwhich surfaced when the Silicon Valley Bank in California’s Silicon Valley had to be taken over by the US Federal Reserve as a result of a deposit flight.
The situation also affected larger banks and eventually led, among other things, to the fact that the giant bank Credit Suisse had to be sold to the competitor UBS.
Credit Suisse after the sale, the price has slowly risen back to the pre-crisis level of 80 dollars until it rose to 85 dollars per barrel on Monday after the OPEC+ announcement.
According to Jokis, in addition to the OPEC+ announcement, the increase in demand in China, which is lifting its coronavirus restrictions, and the sanctions on Russian oil will probably increase prices somewhat.
“Of course, you can’t say that one is not possible, but yes, most analysts rather believe in a moderate rise in prices, perhaps to 90 dollars per barrel,” Jokinen puts his words.
“The majority of the market therefore does not think that the price will rise to $110 even in the summer. It’s by no means impossible, but it’s not mainstream thinking.”
Mixed Heiskanen and Jokinen also believe that fuel price trends will remain moderate, even if the price of crude oil rises slightly from the current level. The market prices of gasoline and diesel do not slavishly follow the market prices of crude oil. For example, on Monday, gasoline and diesel prices strengthened by only half of the five-dollar increase in crude oil.
“Fundamentally, the rise in oil prices is of course also reflected in the prices of gasoline and diesel. Recently, however, fuel prices have been affected quite a lot by many other factors, such as the costs caused by refining”, says Heiskanen.
According to Jokis, these other factors can also balance the possible increase in the price of gasoline and diesel due to crude oil.
“For example, strikes in France have at best halved French oil refining. In addition, the maintenance season for oil refineries is currently underway in Europe. Both of these make it easier towards the summer, which also reduces the effects of a possible increase in the price of crude oil,” Jokinen lists.