Oil Can’T Go Back To The Roof
2021-02-19 | by CusiGO
Architects in the post pandemic world are drawing a green reconstruction of windmills, solar panels, and cars that run on electricity. The three superpowers, China, the United States and the European Union, which are also the largest emitters of pollutants on earth, will minimize their emissions in the coming decades. The decline in oil has been announced for some time. However, due to the use of vaccines, when bright began to appear at the end of the pandemic tunnel, its price experienced a dramatic rebound, with an appreciation of more than 40% in the past six months, making the price of oil in Brent and West Texas more than $60 a barrel, the highest level since January 2020, This makes any oil field profitable.
Why is the price of one of the most disgusting assets rising? The experts consulted cited a number of factors: significant supply cuts by producer countries, especially Saudi Arabia’s decision to reduce its oil pumps by 1 million barrels a day in February and March, which helped to rebalance the market and maintain prices; and growing optimism about economic recovery The global economy predicts that Asian oil giants China and India will increase their demand for oil; investors betting on the return of inflation turn to commodities; the US dollar is still weak; the rare frost in the south central United States has swept Texas, The oil is in good condition, leading to power outages and supply disruptions.
Some are short-term problems that will soon disappear, but prices can also use the bottom trend to move up. Paola Rodr í Guez masiu, an energy analyst at rystad, highlighted one of the problems: a lack of investment. “Without the necessary investment, output will fall faster than demand,” he said In a speech to CNBC network, Jeffrey Currie, an expert at Goldman Sachs, regarded the positive impact of green infrastructure construction as one of the catalysts for the future. He believed that green infrastructure construction would promote the economy and create jobs by injecting stimulus plans promoted by new white house tenants, Joe Biden and the European Union. Paradox: ecological change may promote the value of black gold before large-scale replacement.
Mr curry is one of those who thinks oil prices still have a long way to go: he assured the financial times that oil prices will not rule out more than $80. Supporters of a new oil super cycle insist that weak supply will lead to decoupling from the growing demand encouraged by public stimulus as investment shifts to a green model and long-term low prices, This will lead to shortages and allow the dollar to continue to increase per barrel. But the debate divided analysts. Ing has raised its average price in 2021 from $60 to $65, and Warren Patterson, its Chief Commodities officer, does not expect prices above $70 in the long run this year. “If the oil price goes too high, OPEC + countries may reduce production reduction,” he said
Rodriguez Marceau doesn’t think winning in a row will push up prices either. “Iran is likely to return to the market, demand has yet to recover, and other energy sources competing with oil will become part of its growth: the economy is decarbonizing in key sectors such as electric, diesel and gasoline vehicles, and is becoming more and more efficient, And the popularity of electric cars is higher, “he cites.
Andreas Economou, an expert at Oxford Energy Studies Institute, believes that there is a divergence between the expectation of pushing prices and market fundamentals. “While recent growth has generated overwhelming enthusiasm among analysts, it is important to recognize that a return to pre crisis levels of global demand will be achieved gradually in 2021 and 2022.” People like Christian Malek of JPMorgan, who predict oil prices will exceed $100, sound like mermaids. It’s divided into three reasons that have to be used as a brake. “Even if we assume that there may be difficulties caused by insufficient investment on the supply side, there will be sufficient short-term reserves to meet demand. In addition, high prices are harmful to both importers and exporters, and producer countries have reason to defend the highest prices with the same determination to protect the lowest prices as they are now. Finally, in the past, levels above $100 were only seen in the context of strong demand, stagnant supply due to lack of investment, limited reserve capacity and geopolitical disruption, which has not yet happened. ”
There’s another reason. Although Biden raised environmental issues and asked not to issue new drilling licenses on federal territory, he did not ban fracking. Rodriguez Mathieu believes that if prices rise enough, they will soon stimulate production because there are enough concessions. If the economy overheats, it will increase supply and lower prices.
Patterson of ing estimates that demand will recover substantially in the second half of this year, although he does not expect it to return to the level of 2019 this year. The risks the Dutch entity faces in impeding a return to normalcy include health, economic and political assumptions: the spread of more aggressive tensions, the arrival of a new epidemic, and any indication that the Fed intends to reduce the impact of its bond buying program, Or, the rapid return of the Iranian barrel, which is now rejected by US sanctions, will completely change the rules of the game. In addition, OPEC + countries did not reach an agreement on reducing production at their next meeting on March 4.
At the same time, excessive storage continues to be addressed, which is one of the most obvious consequences of the restrictions. No one will forget that last year, the industry ran out of room to store the remaining oil in a world paralyzed by the virus. Oil prices in West Texas have even fallen below zero dollars, an unprecedented disaster. Once large inventories are cleared, Andreas Economou believes that the largest or smallest investment in new supply capacity will mark a change in prices. Central banks are paying close attention to this development, wary of a possible rebound in inflation, and countries that rely on imported fuel may see their bills rise.