The most important factors affecting the future of the international crude oil market

In the first quarter of 2022, the global commodity market in general showed a strong upward trend under the influence of geopolitical factors, the performance of the commodity markets of international crude oil and global gold has been an impressive performance and consolidated one by one, in the international crude oil market since the rapid recovery of oil prices in 2020 Prices showed an upward trend once again, changes in crude oil demand and suppliers, as well as temporary factors such as sudden geopolitical risks and severe weather have jointly influenced the direction of international crude oil prices.

Judging from the current situation, geopolitical risks remain an important factor affecting the direction of international crude oil prices, as prices have risen due to market fears that geopolitical tensions will affect oil supplies, in general, changes in the geopolitical situation are still the main factors affecting the trend The last of the oil prices.

Crude oil performance during the first quarter of 2022
A research institute indicated that in the first quarter of this year, the trend of crude oil prices is divided into two stages, the first stage: from January to February 23, prices witnessed a steady rise, as that stage was mainly driven by factors of mismatch between supply and demand, which was under the influence of variables. Corona Virus, Phase 2: From February 24 to March 15 when the conflict between Russia and Ukraine erupted, oil prices rose sharply and then gradually fell, on March 7 West Texas Intermediate crude futures touched $130.5 a barrel while Brent crude futures touched $139.13 barrel.

Despite the decline in crude oil prices, they are still high, which will have a negative impact on the global economic recovery, the rise in oil prices increases the cost of production for companies and affects production, but it also increases the cost of living for consumers and harms their purchasing power, which negatively affects activity Macroeconomically, the tensions between Russia and Ukraine will lead to a crisis in international energy supplies, which will positively affect the prices of oil and natural gas, which will result in a significant rise in global inflation and reduce the global economy.

The International Monetary Fund (IMF) estimates that for every 10% increase in oil prices, global economic growth will fall by 0.1% to 0.5%. In advanced economies, every 1 percentage point increase in retail gasoline prices increases CPI ( CPI) will increase by 0.04 percentage points per month, and in developing economies for every 1 percentage point increase in retail gasoline prices, the CPI will rise by 0.02 percentage points per month and will gradually disappear 5-6 months after the price shock.

From the perspective of supply, OPEC Plus did not respond to the requests of some consumers of crude oil to increase its production. On March 29, the Saudi Minister of Energy said that OPEC Plus will exclude political factors from the decision-making process, and added that the presence of OPEC depends on its mission to stabilize oil prices, in addition, he said UAE Energy Minister OPEC’s focus is on balancing the crude oil market and meeting consumer demand, and we are witnessing a large-scale restructuring of global energy markets.

Factors affecting the price of light sweet crude oil:
Crude oil demand
The demand for crude oil is determined mainly by the level of world economic development, changes in the economic structure, the development of alternative energy sources and the application of energy-saving technologies.

Global oil consumption is significantly positively correlated with global economic growth, where global economic growth or unexpected growth positively affects the international crude oil price, but the abnormally high oil prices are considered an obstacle to the development of the global economy, and the slowdown in global economic growth affects on increasing demand for oil.

 

The cost of alternative energy will also determine the upper bound on the price of oil, when the price of oil is higher than the cost of alternative energy consumers tend to use alternative energy, and energy savings will ease the contradiction between supply and demand in the global oil market, at present, countries are working vigorously to develop technologies Renewable energy and energy savings are bound to have an impact on the long-term trend of oil prices.

The supply of crude oil
Factors affecting supply mainly include global oil reserves, supply structure and cost of oil production. Oil supply depends on oil reserves. In the past few decades, proven reserves of global oil resources have continued to increase, but due to the non-renewable nature of oil resources, the International Energy Agency expects that Global oil production will rise in 2015, and global oil supply peaked a year ago and has gradually entered a decline stage.

At present, the supply side of the global oil trading market mainly includes the Organization of Petroleum Exporting Countries (OPEC) and non-members of the Organization of Petroleum Exporting Countries (OPEC Plus), OPEC has most of the world’s proven oil reserves, and due to its own production and price policies It has a significant impact on global oil supplies and prices.

The cost of oil production will also have an impact on oil supplies, as a type of non-renewable energy The cost of oil production will affect the decision to allocate production to producers over time, and then affect the supply in the market, which will lead to fluctuations in oil prices, at present, the Determining the impact on supply is primarily on the data with US EIA crude oil inventories, API crude oil inventories and production by some of the large international oil exporters.

mining price
The price of mining in Saudi Arabia is very low i.e. around less than 10 USD per barrel, so they have always been very confident in the market and get into price wars from time to time, which means a short term profit for them.

While US shale oil is still in the development stage, as drilling new wells is expensive, and therefore lower oil prices will severely limit the profits of producers, according to foreign media reports, if oil prices remain at $ 30 a barrel, many producers will reduce drilling activities, which It will reduce US oil production.

Impact of major international events
For example: In the early stage of the outbreak of the new Covid-19 virus in 2020, there was a negative event for oil prices in the crude oil futures market, and the breakdown of negotiations between Saudi Arabia and Russia directly caused the collapse of crude oil.

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