Oil Prices May Rise Slightly Amid Geopolitical Uncertainty

Experts suggest that rising geopolitical uncertainties, along with decreasing Venezuelan exports, might lead to slight increases in oil and gasoline prices in the near future. However, prices at the pump are expected to stay at their lowest levels since the onset of the coronavirus pandemic.

Andy Lipow, the president of Lipow Oil Associates, has projected an increase of about $3 per barrel for oil, translating to a minor uptick of less than 10 cents per gallon for gasoline. Despite the possible rise, he points out that current oil prices—close to $60.75 per barrel for Brent crude and $57.79 for West Texas Intermediate—are significantly lower than last year’s rates, which exceeded $70 per barrel.

Lipow also mentioned that two main factors could influence the oil market next year: the potential for increased instability in Iran that could disrupt supply and whether OPEC+ decides to alter its production policies to increase revenues in light of their budgetary pressures.

Patrick DeHaan, head of petroleum analysis at GasBuddy, echoed these sentiments, indicating that while Venezuela’s situation is noteworthy, a boost in OPEC+ oil production and global refinery outputs will significantly affect the market this year.

Venezuela’s oil production, having peaked in the late 1990s, no longer holds a dominant position in the global market, contributing to less than 11% of the world’s oil supply. While disruptions in Venezuela could impact prices, they’re unlikely to create a major global supply shock. In contrast, around 20% of the global oil supply traverses the Strait of Hormuz, and instability in that region poses a more serious threat to global oil prices.

Interestingly, Lipow expressed concern that persistently low oil prices could strain OPEC+ members financially. Meanwhile, he pointed out that record oil production levels in the U.S., Canada, Brazil, Argentina, and Guyana might compel OPEC+ to implement production cuts, which could eventually lead to price increases.

Overall, while the outlook suggests slight fluctuations in oil prices, the broader trend seems to favor stability in the market, at least for the immediate future.