Oil prices may usher in a hot summer

According to CNBC report on June 3, as demand picks up, oil prices may temporarily soar to US$80 per barrel or even higher this summer
.

The reopening of the economy has caused crude oil prices to rise by about 40% since the beginning of the year, but the surge in U.
S.
travelers, as well as the increase in cargo transportation and air travel, may further support prices
.

For consumers, this means that the typical peak of gasoline prices in early summer may occur later in the summer
.

According to data from the American Automobile Association, the average price of unleaded gasoline on Wednesday was $3.

International crude oil benchmark Brent crude oil futures prices closed up 1.
6% on Wednesday to 71.
48 US dollars per barrel, the highest level since January 8, 2020
.

July West Texas Intermediate crude oil futures prices rose 1.

Francisco Blanch, global commodities and derivatives strategist at Bank of America, said: “Demand is growing very fast because everyone is driving and the European market is reopening.
In addition, India It seems that an inflection point has been reached.
In my opinion, this may mean the restoration of population mobility
.

"

　　Uncertainty about price increases

　　Energy analysts unanimously believe that oil prices will go up for some time, but there is no consensus on how high and how long oil prices will go
.

Blanche said that Brent crude oil has reached the quarterly target price of US$70 per barrel, and his long-term expectations are more optimistic: "We believe that in the next three years, oil prices may rise to US$100 per barrel.

　　OPEC+ is gradually returning oil to the market, agreeing to increase its daily output by 350,000 barrels in June and another 450,000 barrels from July
.

Saudi Arabia also agreed to abandon the additional production cut of approximately 1 million barrels per day implemented earlier this year

　　In April this year, OPEC+ agreed to increase its daily output by more than 2 million barrels before the end of July
.

　　The current daily output of the US oil industry is approximately 11 million barrels, which is lower than the approximately 13 million barrels before the outbreak
.

However, analysts pointed out that it is unclear how fast American companies can resume production, nor whether they can resume production

　　Blanche said: “Due to capital constraints, manufacturers’ sensitivity to price changes has declined
.

After the price plunge last year, companies are facing pressure to use capital carefully

　　Economic recovery and rising demand

　　For now, with the rebound of the global economy, oil production has not kept up with the increase in demand
.

Even after OPEC+ promised to return crude oil to the market on Tuesday, oil prices continued to rise

　　Daniel Yergin, vice chairman of IHS Markit, said: "Welcome to the world after the epidemic.
We are seeing rapid growth in demand, increasing by 7 million barrels per day
.

Brent crude oil prices are expected to reach an average of 70 per barrel this year.
U.
S.
dollars
.
Oil prices may rise to 80 dollars, although this is unbelievable, it will start to affect demand, and it will also trigger a political reaction
.
"

　　According to John Kilduff of Again Capital, bullish demand and price forecasts have supported the increase in crude oil prices this week
.
He said that OPEC expects that by the end of this year, demand may reach 99.
8 million barrels per day, but supply is expected to reach only 97.
5 million barrels per day
.

　　ReagainCapital John Kilduff (JohnKilduff) said that bullish demand and price expectations supported the increase in crude oil prices this week
.
He said that OPEC predicts that by the end of this year, oil demand may reach 99.
8 million barrels per day, but the supply is expected to be only 97.
5 million barrels per day
.

　　Kilduff said: "I have been expecting oil prices to rise for some time, and Brent crude oil prices are expected to reach US$80 per barrel, and WTI crude oil prices will be traded between US$75 and US$80 per barrel
.
In the long run.
The key is the extent to which the U.
S.
shale industry resumes activities and makes progress
.
"

　　Eric Lee, an analyst at Citigroup, said that he expects U.
S.
drilling companies to eventually return to previous production levels, but he did notice a change in the company's strategy
.
Private companies will respond quickly, and people are very cautious
.

　　OPEC+ currently does not see a threat from the United States.
It has enough spare capacity to curb the rise in oil prices and increase supply when necessary
.
Earlier, price increases made the US shale industry increase its mining efforts, which in turn pushed prices down
.

　　However, we have not seen a strong return of US producers.
Judging from the current performance of these companies, they are more willing to curb production
.

　　Wang Jiajing excerpted and translated from CNBC

　　The original text is as follows:

　　It could be a hot summer ahead for oil prices

　　Oil prices could temporarily spike to $80 per barrel or more this summer as demand comes roaring back.

　　The reopening economy has already sent crude up about 40% since the start of the year, but a surge in driving by Americans, as well as an increase in goods transportation and air travel, could pressure prices further.

　　For consumers, that means the typical early summer peak in gasoline prices could come later in the season.
Unleaded gasoline was $3.
04 per gallon on average Wednesday, about a penny higher than last week but more than 50% higher than a year ago, according to AAA.

　　Brent futures, the international crude benchmark, settled up 1.
6% at $71.
48 per barrel Wednesday, the highest since Jan.
8, 2020.
West Texas Intermediate futures for July were 1.
6% higher at $68.
83 per barrel, after hitting a high of $69.
65, the highest since Oct.
23, 2018.

　　“Demand is ramping up very quickly because everybody's driving, and we have the reopening of Europe, which is really starting to happen,” said Francisco Blanch, global commodities and derivatives strategist at Bank of America.
“India seems to have hit an inflection point , in terms of cases, which in my mind could mean you also get a return of mobility.
"

　　Uncertainty around higher prices

　　Energy analysts agree the world is in for a period of higher prices, but they do not agree how high or for how long.
Blanch said Brent has already hit his $70 target for the quarter, but he has a much more bullish longer-term view than others.

　　"We think in the next three years we could see $100 barrels again, and we stand by that.
That would be a 2022, 2023 story," Blanch said.
"Part of it is the fact we have OPEC kind of holding all the cards , and the market is not particularly price responsive on the supply side and there is a lot of pent-up demand .
.
.
We also have a lot of inflation everywhere.
Oil has been lagging the rise in prices across the economy.
"

　　Members of OPEC and their allies, a group known as OPEC+, are gradually returning oil to the market.
They agreed to implement their previously planned production increase of 350,000 barrels a day in June and another 450,000 barrels a day starting in July.
Saudi Arabia also agreed to step back from its own cuts of about a million barrels a day, which was put in place earlier in the year.

　　OPEC+ had agreed in April to increase output by more than 2 million barrels a day by the end of July.

　　The US industry is producing about 11 million barrels a day, down from about 13 million before the pandemic.
But analysts say it's not clear how fast or whether US companies will restore that production.

　　“The sensitivity of producers to price changes has declined because of capital discipline,” said Blanch.
He said there is pressure on companies to be cautious in how they use capital after the collapse in prices last year.

　　"Right now we're in a position where prices are rising, companies are reluctant to invest," Blanch said.
"They are paying down debt and increasing dividends.
"

　　He said there is also pressure on corporate boards to divest hydrocarbon assets and to work toward net zero on carbon emissions by 2050.
“You have two major forces hampering capex in the energy sector right now,” Blanch said.

　　Rising demand amid the recovery

　　For now, oil production has not kept up with demand, as global economies rebound.
Even after OPEC+ committed Tuesday to return crude to the market, the price of oil continued to tick up.

　　"Welcome to the post-pandemic world," said Daniel Yergin, vice chairman of IHS Markit.
"We're seeing demand is growing rapidly between the first quarter and the third quarter by 7 million barrels a day.
"

　　Yergin said his Brent target is an average $70 per barrel this year.

　　Bullish demand and price forecasts have supported the gain in crude prices this week, according to John Kilduff of Again Capital.
He said OPEC predicted that demand could reach 99.
8 million barrels a day by the end of the year, but supply is expected to reach just 97.
5 million barrels a day.

　　“I've been bullish for awhile now,” said Kilduff.
He expects to see Brent hit $80 a barrel and WTI trade between $75 and $80.
“The demand trends have been exploding .
.
.
The real throes of this I imagine will come as we get closer to Labor Day.
"

　　Kilduff said the key to the longer-term view is how much the US shale industry resumes its former activities and pushes ahead.

　　Citigroup analyst Eric Lee said he expects US drillers to return to their prior levels of production ultimately, but he does note a change in attitude.

　　"If you split them up, the private companies have been responding quickly.
The public independents and the majors have been a lot more cautious," Lee said.

　　OPEC + does not currently see a threat from the US, and it has plenty of spare production capacity to curb higher prices and add supply if it needed to.
Previously, higher prices would be an invitation for the US shale industry to pump more, which could in turn drive prices down.

　　"They're not seeing US producers coming back very strongly at the moment, and I think they're of the view that US producers won't come back strong," he said.
"In terms of how they're behaving now, they're not so worried about shale right now so they're more willing to hold back production.
"