Yesterday, Wednesday, Brent oil closed at 118.98 dollars and WTI at 115.31 dollars per barrel.
Some other financial institutions, such as Citi, have more conservative expectations, but also above their initial forecasts. The bank expects Brent to hit $120 a barrel and WTI $119 a barrel over the summer.
The rest of the oil mixtures, such as the Mexican one for export, tend to follow the dynamics of Brent and WTI. Following these assumptions, the Mexican mix could be quoted between 129 and 134 dollars per barrel during the summer –or the third quarter of the year–, according to Banco Base forecasts.
The Mexican mixture reached its highest level in July 2008, when it was quoted at 132.71 dollars per barrel, according to records from the Bank of Mexico. In this year, Mexican oil reached its highest level in March, at 119.62 dollars per barrel and yesterday it closed at 110.92 dollars per barrel.
Banks and analysts argue that this increase in price is necessary to limit the demand and return the dynamics of equilibrium to the market during the next year, after at the height of the pandemic the demand uncontrolled the market, the companies reduced their investments and closed wells, and now the war in Eastern Europe has raised the fears of a shortage.
And about the causes: the banks have raised their forecasts due to the embargo on Russian exports –the European Union recently prohibited Russian imports by ship–, which will further limit the global supply of crude oil; China has once again increased its demand after closures to try to control a new outbreak of Covid and a delay in the removal of sanctions on Iran, which have been repeatedly postponed.
A increase in Saudi Arabian production could ease fears of a lack of crude. US President Joe Biden will visit the country next July at the request of Saudi Prince Mohammed bin Salman, but so far there has been no major announcement about it and an accelerated increase in Saudi production could put its assets at risk in the long term. .
Ana Azuara, an analyst at Banco Base, says that it is usual that during the third quarter of the year -which coincides with the summer- the price of oil registers an increase, which is explained by a greater demand for fuels for uses such as transportation and the heating. The presence of hurricanes in the southern United States – in states like Texas or Louisiana – also sometimes force producers to close their platforms and this reduces supply.
“It doesn’t mean that the price is going to be high all quarter, it can reach it if these things come together,” he explains.
An increase in the price of crude oil would bring with it higher fuel prices and inflationary pressures. Many governments, like the Mexican one, have reduced the tax burden on gasoline and, although this has helped reduce inflation levels, it has caused the level of consumption to be maintained and that has not been useful with a restriction in supply crude world.