The oil market is looking very confident. As of Friday, oil prices go as follows. WTI Crude: $76.63 per barrel, Brent Crude: $80.63 per barrel, Murban Crude: $82.19 per barrel, Natural Gas: $2.784 per million British thermal units, and Gasoline: $2.759 per gallon. These prices aforementioned are for the front-month futures contract.
These prices are up slightly from yesterday's prices. The increase in oil prices is being driven by a number of factors, including the ongoing war in Ukraine, which has disrupted global oil supplies. Additionally, the demand for oil is rising as economies around the world begin to recover from the COVID-19 pandemic.
The Organization of the Petroleum Exporting Countries (OPEC) and its allies have agreed to cut production in order to support prices. This is also contributing to the bullish sentiment in the oil market. The cut in oil production plays an important role in determining oil prices. It leads to an increase in oil prices because it decreases the supply of oil available on the market. When supply decreases, demand tends to increase, which pushes prices up.
China’s demand for oil continues to dominate oil imports. As China's demand for oil increases, it is putting upward pressure on prices. It is essential to understand that China’s rapid urbanization after years of economic backwardness under Mao is leading in demand for transportation fuels. Moreover, China's middle class is growing rapidly, and this is leading to an increase in the demand for consumer goods and services, which require oil.
China's demand for oil is also being affected by the government's policies. For example, the government has been encouraging the use of electric vehicles, which could reduce the demand for oil in the future. However, the government has also been investing in new oilfields, which could offset the impact of electric vehicles. China's oil consumption has increased by an average of 4.5% per year since 2010. China is expected to account for 27% of global oil demand by 2030, and its oil imports have increased by an average of 6.5% per year since 2010.
The price of oil is expected to remain volatile in the coming months, as the global economy continues to recover and the war in Ukraine drags on. Indeed, the Russian central bank raised interest rates, as of Friday. This can lead to a decrease in demand for oil, which can also put downward pressure on prices since high-interest rates make it more expensive for consumers to buy oil.
However, the long-term outlook for oil prices is positive, as the world's population continues to grow and the demand for energy increases.