Bank of Korea: "International Oil Prices to Maintain Strong Trend for the Time Being"

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Kim Eunbyeol] The Bank of Korea forecasted that international oil prices will maintain a strong trend for the time being despite the spread of the COVID-19 Delta variant.

According to the 'Overseas Economic Focus' released by the Bank of Korea on the 1st, international oil prices, based on Dubai crude, rose to the mid-$70 range last month but have recently stalled. On the 6th of last month, the price reached $76.0 per barrel, the highest level since October 23, 2018 ($76.7), but recently fell to the low $70 range. The average price of Dubai crude moved from $66 in May, $71 in June, to $73.9 from July 1 to 16, and $71.4 from July 19 to 28.

The Bank of Korea evaluated that prices surged due to increased uncertainty in oil supply following the failure of an agreement by the Organization of the Petroleum Exporting Countries (OPEC)+, but prices slightly declined after the final agreement was reached on the 18th.

The spread of the Delta variant, especially in emerging countries with low vaccination rates, is also acting as a factor for oil price decline due to concerns over delayed demand recovery.

However, the Bank of Korea, utilizing forecasts from JP Morgan and others, predicted that international oil prices will maintain their strength for the time being as the imbalance in oil supply and demand continues.

JP Morgan and others assessed that despite the possibility of delayed oil demand recovery, the supply shortage in the market will persist. The reason for the continued supply shortage is that the agreed daily production increase of 400,000 barrels by OPEC+ is below the initially expected 500,000 barrels.