Inflation is on hold and oil prices are on the rise

2022-05-27 0 By

On Thursday afternoon, WTI crude oil futures surged 2.5 percent above the $90 level on a slew of supply-side pressure news, adding fuel to the global inflation jitters.While the COVID-19 pandemic remains a negative factor hanging over demand, the impact of the omicron wave on major consuming countries is diminishing, while the combination of weak OPEC production and adverse weather conditions on oil production is supporting the rally.Ubs commodities analyst Giovanni Staunovo interpreted that OPEC+ ‘s surplus capacity would fall to a low level in 2022 as the group gradually unwinds its production cuts.Assuming that travel restrictions related to the pandemic are completely lifted by next year, that means global oil demand, which continues to expand, will also rise further.Goldman Sachs, more direct than UBS, has called for oil to top $100 in the third quarter of this year.It is worth noting that while crude oil prices are at their highest in nearly seven years, many OPEC countries are not even using up their allotted production quota.According to media reports, Iraq’s crude oil production capacity in January was 4.16 million b/d, significantly below its production quota of 4.28 million b/d.Nigeria, which is also struggling to meet its crude production quotas, recently suffered an explosion on an oil production ship.The U.S. is now experiencing severe cold weather across the northeast and central parts of the country, the oil market’s hope for an increase, which is more likely to appear as a supply-side negative, at least in the short term.(Credit: Financial Union)