Oil Price Nears $45 Per Barrel, Hitting a New Record-High

A new record-high for international oil prices, nearing the $45 mark per barrel, was set again due to a setback in Iraq’s oil production and an aggravating situation for the Russian oil giant Yukos.

Meanwhile, the stock of international oil is not sufficient enough to satisfy supply for even 60 days, bringing about the analysis that the possibility for an oil shortage situation is higher than ever.

According to the Korea National Oil Corporation (KNOC) on Tuesday, the spot price of West Texas Intermediate (WTI) crude jumped by $0.98 from the previous day, closing at $44.82 per barrel.

This figure marked a historic high, rising by more than $13 from last year’s average price of $31.11.

The price of WTI futures for September delivery rose by $0.89 to close at $44.84, hitting a record-high based on the closing price ever since futures trading for oil started in 1983.

The price for Brent crude also rose to $41.78, $0.50 higher than the previous day. The September delivery price for Brent crude rose by $0.93 and closed at $41.56, its highest ever price since trading in Brent crude futures started in 1988.

Experts analyzed that the unstable oil prices were due to the suspension in oil production overlapping with the worry that the Russian oil company Yukos may not be able to supply oil.

Meanwhile, Kim Byeong-il, chief of the New Ventures Department at KNOC, said in a report on whether or not an oil crisis will happen that an approximately 88-day supply for oil is left in international stocks (commercial plus strategic stocks), and considering the transportation period, the actual stock will not be an adequate supply for even 60 days.

Accordingly, the report forecasted that if the oil fields or key production facilities that were broke down in the major oil producing countries are not restored in 60 days, the world may face an oil shortage crisis.

The report also presumes that the commercial stock (stock which private oil companies possess) for the current month of August has fallen to its lowest level, with the stock not even reaching the 58.9-day supply of last year’s August. Accordingly, there is high possibility that high oil prices will continue throughout the second half of the year.

Kim stressed, “Korea is the ninth-highest oil consuming country, and has a vulnerable structure for an oil crisis. It must be understood that the possibility for an oil crisis is higher than ever, and the situation must be confronted positively.”

Chi-Young Shin Kwon-Heui Hong higgledy@donga.com konihong@donga.com