International Oil Prices Hit 3-Year High: "Heading to $90"

Crude Oil Demand Recovers to Previous Levels
Domestic Gasoline Prices Also on the Rise

[Asia Economy reporters Choi Dae-yeol and Cho Hyun-ui] International oil prices surged amid concerns over supply shortages, triggering alarm bells for inflation. North Sea Brent crude and West Texas Intermediate (WTI) crude oil in the U.S. reached their highest levels in three years on the 27th (local time). Some forecasts even suggest that international oil prices could surpass $90 per barrel within the year.

Brent crude rose 1.84% to $79.53 per barrel on the London International Futures Exchange (ICE) that day, approaching $80. This is the highest level since October 2018. Bloomberg reported, "The psychological resistance level of $80 was not breached because some speculators are taking profits," adding, "It is expected to surpass $80 within a few days."

November delivery WTI closed at $75.45 per barrel on the New York Mercantile Exchange, up 1.98% from the previous trading day. WTI also rose for five consecutive trading days, marking its highest level since October 2018.

Investment bank Goldman Sachs forecasted that Brent crude prices would exceed $90 by the end of this year. Considering the aftermath of Hurricane Ida, they revised their previous forecast upward from $80 to $90. The WTI price forecast was also raised from $77 to $87.

Goldman Sachs stated, "Ida has impacted U.S. crude oil supply to an extent that more than offsets the production increase by OPEC+ (the Organization of the Petroleum Exporting Countries (OPEC) member countries and non-OPEC allies)." They added, "As the impact of the Delta variant virus diminishes, oil demand in the Asia region is recovering to pre-pandemic levels. Although oil-producing countries will negotiate production volumes next week, it is unlikely to deviate from our forecast."

International oil prices are expected to remain higher than pre-COVID-19 levels. The Bank of Korea, in its report titled 'Assessment of Recent International Oil Price Trends and Future Outlook' released the previous day, predicted that international oil prices would maintain around $70 per barrel in the second half of this year. Although prices are expected to decline gradually after next year, they will remain higher than pre-pandemic levels due to ongoing supply-demand imbalances.

On the 28th, as domestic gasoline prices steadily rose and maintained the highest level in three years at the 1,600 won range, fuel price information was displayed at a gas station in Seoul. Photo by Kang Jin-hyung aymsdream@

Domestic gasoline prices at gas stations have also turned to a slight upward trend since last weekend. According to the Korea National Oil Corporation, the gasoline retail price in Seoul was 1,729.1 KRW per liter, up 1 KRW from the previous day. The nationwide gasoline retail price also rose by 0.14 KRW to 1,644.07 KRW per liter.

Domestic gasoline prices had sharply increased for 15 consecutive weeks since early May but halted their rise in mid-last month. After five consecutive weeks of slight declines, prices have shown a modest rebound since last week. Considering the lagging nature of domestic gasoline prices following international oil prices, domestic gasoline prices are expected to rise further.

Natural gas, which has been soaring alongside crude oil, continues to exert pressure on inflation. October natural gas prices closed at $5.706 per million Btu, up 11.01% that day. This is the highest price since February 2014.

Warnings have been issued that the situation in Europe will become particularly severe as the winter heating season approaches. Europe relies on Russian natural gas for about 40% of its consumption, but Russia recently announced plans to reduce exports to Europe to increase exports to the Asia region. Bloomberg expressed concern, stating, "The natural gas crisis originating in Europe will spread to other regions."