(BFM Bourse) – After having faltered at the end of November in the face of the appearance of Omicron, oil prices have since recovered sharply thanks to reassuring news about the dangerousness of this variant, but not only. Analysis with Benjamin Louvet, commodities manager at Ofi Asset Management.
On the rebound since the beginning of December, the prices of the main world crude references have just returned to their level before the crash caused by the appearance of the Omicron variant on November 26 – a session during which the barrels of Brent and WTI had dropped. more than 10% each. If they decline slightly on Monday (-0.9% to 81.1 dollars for the European benchmark and -0.8% to 78.3 dollars for the North American), the two have recovered more than 15% since their trough of a month and a half ago. This increase could also continue according to Benjamin Louvet, commodities manager at Ofi Asset Management, who sees the barrel of Brent close to 100 dollars at the end of the year given the shortage of supply.
According to him, four elements justify the recent upward trend in prices. “The first observation is that prices have erased their fall of 10% in a session recorded at the end of November with the appearance of Omicron. The reassuring news about the dangerousness of this new variant has led operators to rule out the risk of real economic repercussions, and this is the first element. The second is the situation in Libya, where supply is currently limited due to the closure for maintenance of several fields. The third, little mentioned, is the extreme cold which is rife over a large part of Canada and the United States with spectacular temperature variations (from nearly 30 ° on January 3 to -18 ° the next day in Texas for example), which led to the shutdown of oil infrastructure and reduced production in the short term.And finally, the last element is the too high compliance rate (127% as of January 6) within OPEC compared to the reduction targets, which means that a a number of countries (Angola, Nigeria) seem to have ere having difficulties in raising their production “he enumerates.
To make matters worse, Russia, which is one of OPEC’s allies (within OPEC +), “does not produce the quantities assigned to it either, and has been doing so for several months, which raises concerns. questions about its ability to meet its production targets. ” “Energy Minister Alexander Novak had also declared that Russia’s peak production would occur at the end of 2021” recalls the expert, according to whom this scenario therefore seems to be confirmed today.
“The situation in Kazakhstan also accentuates the pressure on prices” notes Benjamin Louvet. This country of Central Asia and the former Soviet republic is indeed in the grip of demonstrations which turn to insurgency and violent repression (dozens of demonstrators have been killed) by the authorities. An explosive situation that raises concerns about production disruptions, while the country is currently pumping nearly 1.7 million barrels per day.
In addition, the production of the largest OPEC producer countries and its allies has already returned more or less to its pre-crisis level and most of the deficit does not come from these countries but … from the States. United, with a slowdown in the shale sector which is running at 92% of its pre-crisis capacity, and far from its peak production reached in 2018, underlines Benjamin Louvet. “All this put together means that the fears that I had mentioned (from June 2021, Editor’s note) concerning a market imbalance materialize and could have consequences on prices”.
“Our price targets are around $ 85 a barrel during the winter, then $ 80 in the spring, $ 90 during the summer and $ 95 at the end of next year, with possible spikes to $ 100 in the event of exaggeration of the market, which could be linked to “tools”, that is to say unscheduled interruptions of production “he anticipates.
Because this rebound comes when global demand has already returned to around 100 million barrels per day, very close to its pre-pandemic level, even though air transport is still only at 60% of its capacity ” normal “- which currently affects global demand to the tune of 3 million barrels per day.
Quentin Soubranne – © 2022 BFM Bourse