#Algeria : The price of crude oil reached a three-year high on Monday, boosted by supply disruptions in Libya and Nigeria among others, and by a rise in demand, despite the Omicron variant.
Several factors contributed to this price rebound, including production disruptions «in Libya, Nigeria, Angola, Ecuador and more recently in Canada due to extreme cold», explains Hussein Sayed, analyst at Exinity.
«Markets remain focused on the delicate balance between supply and demand, which appears to have a fairly large impact on price swings throughout the post-pandemic economic recovery», notes Walid Koudmani, an analyst at XTB.
Nigeria, for example, has been producing 0.5 million barrels per day less since mid-2020, or 1.4 million bpd, according to SEB figures. Angola’s supply has also been declining since 2016, now reaching 1.2 million barrels per day.
>>> READ ALSO: Who are the top 10 African oil producers in 2021?
Geopolitical risk is also added to the equation. If the conflict between Russia and Ukraine escalates and leads to further disruptions in Russian gas supplies to Europe, energy prices, and therefore crude oil, could rise further, some analysts say.
On Friday, the United States accused Russia of having dispatched agents to Ukraine to carry out «sabotage» in order to create a «pretext» for an invasion of the neighboring country. What further heighten tensions between the two countries when a major cyberattack hit Ukraine.
Natural gas prices, which are still very high, are also contributing to the rise in oil prices. It results «an increase in demand for diesel and fuel oil to replace natural gas, wherever possible», underlines Bjarne Schieldrop, analyst at SEB.
>>> READ ALSO: Oil and gas: inflation, budget deficits and current accounts, African countries will toast
Tensions are building up on producers as demand picks up.
The Omicron variant of Covid-19, first seen as a threat to crude purchases, is proving less severe for demand than its predecessors, not impacting fuel consumers.
OPEC in a strong position
«Only OPEC members and their allies can drive prices down at this point by pumping more crude», notes Sayed.
«Instead, OPEC+ countries are likely to stick to their strategy of gradually easing production cuts as they take advantage of the current high prices.», he continues.
The Organization of the Petroleum Exporting Countries (OPEC) and its partners (OPEC+) are indeed announcing month after month marginal increases in their extraction targets, and are struggling to achieve them, which should not make it possible to meet needs.
>>> READ ALSO: Oil & Gas: Even though prices are skyrocketing, here’s why African countries can’t take full advantage
Saudi Arabia had claimed after the OPEC meeting earlier this year that sticking to the deal and the caps was essential. In other words, members with spare capacity cannot and should not step in to compensate for the lack of production of members who are unable to meet their caps.
«OPEC+ output gaps set to widen with Russia next big deficit driver», foresees Joel Hancock for Natixis. According to him, the growth in oil supply outside OPEC+ and outside the United States being «relatively low», it will be necessary «draw on US shale oil to meet projected consumption growth».
During the pandemic, the plunge in crude oil prices into negative territory had tipped into the insolvency of companies drilling for shale oil, the cost of which is much higher than the light oil drilled for example in Saudi Arabia. .
Many analysts now expect crude prices to rise above $90 a barrel, or even the $100 mark. For Hussein Sayed, «what seemed impossible a few months ago now has a strong chance of happening».
.