1. Home
  2. Live Market Analysis
  3. Oil Soars as Inflation Pressure Increases
Oil Soars as Inflation Pressure Increases

On Wednesday 8th June, oil soared to a 13-week high with Brent crude climbing over 2% to $123, and West Texas Intermediate (WTI) to $122 per barrel. Both Goldman Sachs and the Bank of America are predicting that the prices will surpass $140 pb.

This may be seem like good news for the bullish oil investors, but for the rest of the world, its less than ideal. Petrol station prices have already surged to record highs in the US and in Europe, and some economists predict that further price increases could trigger a recession.

Oil prices are mainly influenced by the supply and demand within an economy. In other words, increased supply should bring the price down, while increased demand should bring the price up. However, oil prices continue to soar despite OPEC+ decision to boost production last week. If anything, the prices climbed a further 5% since then.
OIL - 09.06.2022 - 1.jpg

Why are oil prices growing?

Oil is a type of asset that is highly susceptible to market conditions, and the past few months have been action-packed with events that have been influencing oil prices.

Last week OPEC+ announced that it would increase oil supplies by 648,000 barrels per day in July and August. This is a significant increase from its previous monthly boosts of roughly 400,000 barrels a day. Normally, this should have sent oil prices downward, but instead the prices continue to rally.

According to some investment managers, the reason behind the prices continuing to rally is that there’s a lot of doubt as to whether the oil-producing countries will be able to meet these quotas. This is because over the past few months OPEC+ has been missing its target output by 2.6 million barrels a day. According to Matt Smith, lead oil analyst at Kpler, "OPEC+ may be talking about higher production, but the likelihood of those barrels hitting the market via exports is pretty unlikely."

Naturally this adds further pressure on a market that is already expecting to be 3 million barrels short per day, because of Europe’s ban on Russian oil. In retaliation for the invasion of Ukraine, Europe is looking at banning all Russian seaborne petroleum imports, amongst others. The total revenue from oil exports sank by $9 million between April and May.

Another factor that could be influencing the economy is that China is slowly coming out of a harsh lockdown, creating an increase in demand for oil. As the world’s biggest oil importer, Chinese consumption comes out to a whopping 16 million barrels per day.

In short, the markets are dealing with Russia’s oil being taken off the market while OPEC+ fails to increase production, and China’s exit out of lockdown triggers demand. This is putting a strain on supply on a global scale and propelling the prices upward.

IMPORTANT NOTICE: Any news, opinions, research, analyses, prices or other information contained in this article are provided as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and therefore, it is not subject to any prohibition on dealing ahead of dissemination. Past performance is not an indication of possible future performance. Any action you take upon the information in this article is strictly at your own risk, and we will not be liable for any losses and damages in connection with the use of this article.
RISK WARNING: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. A high percentage of retail client investors lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Copyright © 2022 – All rights reserved.

NAGA is a trademark of The NAGA Group AG, a German based FinTech company publicly listed on the Frankfurt Stock Exchange | WKN: A161NR | ISIN: DE000A161NR7.

Any trademarks appearing on this website are the property of their respective owners.

The NAGA Group AG is the holding company of various companies, such as NAGA GLOBAL LLC, NAGA MARKETS EUROPE LTD, NAGA Technology GmbH, NAGA Pay GmbH and has a close link with NAGAX Europe OÜ.

RISK WARNING: Derivatives are complex instruments and come with a high risk of losing money rapidly due to leverage. A high percentage of retail investor accounts lose money when trading derivatives with this provider. You should consider whether you understand how derivatives work and whether you can afford to take the high risk of losing your money.

Trading with NAGA Trader by following and/or copying or replicating the trades of other traders involves high levels of risks, even when following and/or copying or replicating the top-performing traders. Such risks include the risk that you may be following/copying the trading decisions of possibly inexperienced/unprofessional traders, or traders whose ultimate purpose or intention, or financial status may differ from yours. Before making an investment decision, you should rely on your own assessment of the person making the trading decisions and the terms of all the legal documentation.

Restricted countries: NAGA Group AG does not provide services for the residents of certain countries, such as Afghanistan, Albania, American Samoa, Australia, Barbados, Belgium, British Virgin Islands, Burkina Faso, Cambodia, Canada (including Quebec), Cayman Islands, Central African Republic, Congo, Democratic People's Republic of Korea, Democratic Republic of the Congo, Gibraltar, Guam, Haiti, Iran, Iraq, Isle of Man, Israel, Jamaica, Jordan, Libyan Arab Jamahiriya, Mali, Monaco, Morocco, Myanmar, Nicaragua, Philippines, Russian Federation, San Marino, Senegal, Serbia, Somalia, South Sudan, Sri Lanka, Syrian Arab Republic, Trinidad and Tobago, Tunisia, Turkey, Uganda, Ukraine, United Kingdom, US Minor Islands, US Virgin Islands, USA, Vanuatu, Yemen, Zimbabwe.

Member of NAGA Group AG that is publicly listed in Frankfurt Stock Exchange.
close icon
By using this website, you agree to our cookie policy