. What Is The Oil Price This Week - 20 February 2023

What Is The Oil Price This Week – 20 February 2023

20 Feb 2023

Political unrest and supply issues cause the price of crude oil to increase.

Oil prices traded higher Monday, recouping some of last week’s heavy losses on heightened geopolitical tensions and concerns over the future supply outlook.

By 04:30 ET (09:30 GMT), U.S. crude futures traded 0.9% higher at $77.23 a barrel, while the Brent contract rose 1% to $83.81 a barrel.

The crude market is feeling the benefit Monday from the diplomatic spat between Beijing and Washington over issues surrounding the alleged Chinese spy balloon.

This was heightened over the weekend after China warned the United States that it would “bear all the consequences” if it escalated the controversy, while the U.S. responded by warning China against arming Russia’s war effort in Ukraine.

Added to this, North Korea reportedly fired three ballistic missiles off its east coast on Monday, while the U.N. nuclear watchdog has found uranium enriched to 84% in Iran, a level that’s very close to weapons grade.

On a more fundamental level, concerns are growing about the tight global supply as the year progresses and China, the world’s largest importer, recovers from its self-imposed COVID restrictions.

Russia is set to cut oil production by 500,000 barrels a day in March in response to the Western powers imposing price caps on its oil and oil products.

Additionally, the Organization of the Petroleum Exporting Countries and allies, a group known as OPEC+, last October stated it would cut oil production targets by 2 million barrels per day until the end of 2023.

Future oil supply shortages are likely to drive prices toward $100 a barrel by the end of the year, Goldman Sachs said in a note on Sunday.

Prices will move higher “as the market pivots back to the deficit with underinvestment, shale constraints, and OPEC discipline ensuring supply does not meet demand,” analysts at the investment bank wrote.

That said, the crude market had a difficult week last week, with both benchmarks dropping around 4% on worries that more Federal Reserve interest rate hikes will depress economic activity in the U.S., the largest consumer in the world.

“A raft of strong data in recent weeks has raised expectations for a more hawkish Fed, which has weighed on the bulk of risk assets,” said analysts at ING, in a note.

Oil prices were also hit by substantially higher-than-expected U.S. inventory builds last week, while the Biden administration also announced the sale of 26 million barrels of crude from the Strategic Petroleum Reserve.