Towards January-end, the U.S. oil crossed above $90 for the first time after 2014. The main driving factor is the increasing demand for petroleum products. Besides, supply chains remain constrained.
In the second half of the current year, oil prices will rise over $90 per barrel as China increases consumption and Russia reduces its output. The prediction is based on a recent report by Reuters.
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As a result of escalating Western sanctions that are reducing its income, Russia plans to reduce output by 500,000 bpd and further reduce oil shipments from its western ports by up to 25% next month.
Prices last exceeded the $90 threshold in October 2014.
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“The market remains bullish on oil prices, as it has since May 2020 when OPEC+ enacted mega cuts to its output, bringing oil from negative territory to a quite reasonable jump away from $100 per barrel. Moreover, the general expectation is that the market, despite some downward blips caused by pandemic demand scares, will continue to trade high on oil as real supply shortages exist both in the short and long-term view,” says Louise Dickson, senior oil markets analyst at Rystad Energy.
Since hitting historic lows in April 2020, oil has experienced a ferocious rally as demand has increased and producers have controlled supply. However, geopolitical unrest in the Middle East and between Russia and Ukraine has also shaken the market.