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June 28, 2022

Price of oil could fall below USD 80 per barrel

The oil market is similar to the grain market this year. European producers were forced to accept price offers for wheat and corn by up to 30 per cent lower than in the last three years.
On the oil market the situation is even more dramatic, after Saudi Arabia has given up maintaining the price of oil at USD 100 per barrel. Saudi Arabia, which exports approximately 30 per cent of total OPEC sales, has deemed that a production drop and a high price level would not only affect the producers’ revenues but would also endanger the financial support for exploration works in new perimeters.
The decision was taken under pressure from the drastic fall in US demand, with the US currently using its own resources, shale gas resources in particular. European and Chinese demand also fell a lot.
Consequently, the price fell below USD 90 per barrel last week, and authorized sources point out that Saudi Arabia will accept a price of up to USD 80 per barrel or even lower. According to Reuters, Kuwait’s Oil Minister pointed out that the price could drop to USD 76-77 per barrel. This seems the only alternative for balancing the demand/supply ratio on the world market. Many European analysts emphasize that the current context, coming before the onset of winter, could place the Russian Federation, one of the important market players, in great difficulty and could render relations between Moscow and Western chancelleries more flexible in the situation created by the Ukraine crisis. However, it seems Russia has already taken steps in order for its exports not to be “regulated” in relation to European demand. Asia, China respectively, could represent Russia’s main outlet for hydrocarbons in the next decade.

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