EIA: crude oil prices increased in 1H22 and declined in 2H22
Published by Bella Weetch,
Editorial Assistant
Hydrocarbon Engineering,
In the final trading day of 2022, the spot price of Brent crude oil, a global benchmark priced in Northwest Europe, closed at US$85/bbl, US$7 higher than the price on 3 January 2022 (US$78/bbl). The Brent price rose significantly in 1H22 but generally declined in the second half of the year. The spot price for West Texas Intermediate (WTI), a benchmark price for US crude oil, followed a similar pattern, finishing the 2022 trading year US$4/bbl higher than on 3 January 2022. The Brent crude oil spot price averaged US$100/bbl in 2022, and the WTI spot price averaged US$95/bbl.
In 1H22, geopolitical tension with Russia, culminating with Russia’s full-scale invasion of Ukraine on 24 February 2022, contributed to crude oil price increases. On 8 March 2022, the combination of Russia’s invasion of Ukraine with low global crude oil inventories lifted the 2022 crude oil price to the highest inflation-adjusted price since 2014.
The WTI price followed a similar path as the Brent crude oil price in 2022, averaging US$5/bbl less than the Brent crude oil price, compared with US$3/bbl less in 2021. The Brent-WTI crude oil spread (the difference between the two prices) increased in 2022 relative to 2021 because European countries needed to replace crude oil supplies they were importing from Russia with crude oil from another source. European markets were also affected by a strong US dollar that made imported crude oil more expensive.
Crude oil prices increased in 1H22 because of supply concerns. Russia’s full-scale invasion of Ukraine came during eight consecutive quarters (from 3Q20 to 2Q22) of global crude oil inventory decreases. The lower inventory was the result of withdrawals from storage to meet the demand that resulted from rising economic activity after pandemic-related restrictions eased.
From 8 June 2022 through the remainder of the year, crude oil prices generally decreased as concerns about a possible economic recession reduced demand. High petroleum prices were one cause of persistent broad-based inflation in 2022 that affected consumer budgets and gasoline demand. High crude oil prices led to lower U.S. gasoline demand as gasoline prices rose. Meanwhile, severe COVID-19 containment measures in China contributed to lower global petroleum demand. On 8 December 2022, the price of Brent crude oil reached the lowest 2022 price, at US$75/bbl.
Crude oil supply also increased in the second half of the year from US and international Strategic Petroleum Reserve release programmes, which increased the global supply of crude oil.
Read the article online at: https://www.hydrocarbonengineering.com/refining/04012023/eia-crude-oil-prices-increased-in-1h22-and-declined-in-2h22/
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