Will the European Energy Crisis Trigger Supply Concerns... International Oil Prices Expected to Rise

On the 4th, as international oil prices fall and fuel tax is further reduced, citizens are refueling their vehicles at a gas station in Seoul. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Minji Lee] There is an analysis that international oil prices will attempt to rise further in the second half of the year. Although concerns about economic slowdown are growing, there are worries that supply shortages may occur as oil exports increase due to the European energy crisis.

On the 28th, the price of West Texas Intermediate (WTI) crude oil was trading around $94 per barrel. Compared to this month's low of $86.53 (August 16), it has risen by about 10%. International oil prices have been gradually increasing since mid-August. Expectations have emerged that demand may not be as bad as anticipated as U.S. crude oil inventories have decreased for two consecutive weeks. U.S. retail gasoline prices have also stabilized, and gasoline inventories have declined for three consecutive weeks.

The Saudi Arabian Minister of Energy mentioned the possibility of production cuts by OPEC, including Saudi Arabia, stating that crude oil futures prices do not reflect fundamentals, which also stimulated the rise in oil prices due to concerns about supply reduction. The Organization of the Petroleum Exporting Countries Plus (OPEC+) agreed to increase production by 648,000 barrels per day in July and August, but the increase for September has been significantly reduced to 100,000 barrels per day.

Jeon Gyu-yeon, a researcher at Hana Securities, said, "Discussions on production cuts for October may take place at the regular OPEC meeting scheduled for early next month, but the International Energy Agency (IEA), the U.S. Energy Information Administration (EIA), and OPEC are all closely watching future crude oil demand," adding, "Due to high economic uncertainty, doubts remain about whether international oil prices will rise further."

While the global economic slowdown continues and expectations for crude oil demand are lowering, there are increasing factors that could stimulate oil price rises. Despite the U.S. releasing large amounts of strategic petroleum reserves, commercial crude oil inventories are decreasing, raising concerns about supply shortages. Due to Russia's weaponization of gas, European oil demand is also likely to increase. As fuel for power generation shifts from gas to oil, U.S. oil exports to Europe have significantly increased.

Since the factors driving oil prices up and down are evenly matched, international oil prices are likely to fluctuate within a range for the time being. However, there is a strong possibility that prices could rise to around $120 per barrel in the fourth quarter of this year. This is expected as the end of strategic petroleum reserve releases (late October) and heightened concerns over the European energy crisis are factored in, prompting attempts at price increases. Researcher Jeon said, "There is room for additional increases in the second half of the year, but from a mid- to long-term perspective, the impact of high-intensity tightening from next year will increase global economic slowdown pressures, reducing actual crude oil demand and causing oil prices to decline gradually."