While oil and gas prices may continue to weaken in the near term, by the time winter sets in, the market is going to become extremely tight and the per-barrel price of oil should return to around $120, Energy Aspects’ Amrita Sen told Bloomberg Surveillance on Monday.
Sen suggests that while gasoline prices have declined, demand remains strong. Sen cites petrochemical weakness due to China’s back-and-forth COVID lockdowns, which have contributed to the high availability of nafta to be blended into gasoline. However, she insists this is “not a demand problem; it’s a supply problem”.
The national average per gallon of gasoline in the United States continued to fall on Monday, dropping to $4.059, according to AAA.
At the same time, crude oil prices are solidly below $90 per barrel.
Sen said she is not expecting a “sudden increase” in prices due to upcoming seasonal refinery maintenance; however, by the time winter hits, and particularly after November, she expects supply to become “very, very tight”.
On November 1st, releases from the U.S. Strategic Petroleum Reserve (SPR) will halt. In March this year, the Biden administration ordered the release of 1 million barrels per day from the country’s emergency crude stockpile in a bid to lower gas prices. Last week, the SPR fell to its lowest level in nearly four decades, according to the U.S. Department of Energy data.
The stoppage of the SPR releases will then be followed by the implementation on December 1st of the European Union’s embargo on Russian crude.
This will also coincide with the meeting of the China party congress, which Sen says she believes could make way for some easing of the COVID lockdown restrictions that have tampered with demand.
“The market is going to tighten up very, very quickly,” Sen told Bloomberg. “We still maintain our forecast of $120 per barrel,” she added.
NB: Charles Kennedy wrote this article for Oilprice.com
