(Photo: Sumitomo Corp)

Oil Market has so far into 2022 been on an upward trajectory, with the Brent and WTI hitting above USD 100/bbl mark for the first time in many years, well in line during pre-2014. The price has defied common expectations especially with the strong run of ESG agenda pushed by institutional investors.

There are several crucial factors that could support oil price at current level at least for the foreseeable future, such as the Russo-Ukrainian war and the depleting oil reserves notably in the US. Perhaps to contain Russian military aggression in check, several European nations have imposed various economic sanctions such as with the Russian oil and gas embargo. These actions will no doubt impose cost and raise consumer energy price due to alternative sourcing.

The US Strategic Petroleum Reserves has also fallen down from as high as 634.9 MMBbl in December 2019 to as low as 556.8 MMBbl in April 2022 and with lesser reserves, this has provided strong momentum for higher price in the future. With the global roll out of Covid-19 vaccines and the slow return to normal, the energy demand has also been steadily on the rise, negating the past over supply effects.

Perhaps the only thing that could keep oil price in check is the inflation. Fed policymakers and several other central banks have raised interest rate to combat the high inflation. The side effect would be a slow down in economic activities and thus, the reduction in energy demand. With lower energy demand, and with current oil production rate, the oil price is bound to fall in the future.

Nevertheless, it’s not that clear if the Fed action alone could bring down the oil price. With the still spreading Covid 19 infections and therefore lock downs in some part of China, there will be less energy demand from the world’s largest energy consumer in some time to come, and this would prove to be a major headwind for oil price at least for the remainder of 2022.

However, one clear thing is that the current oil price has provided bonanza for many oil companies, with Shell reported highest quarterly profit since 2008 and several others reported higher profit due to higher oil price.

escveritasEnergyOil & Gas(Photo: Sumitomo Corp) Oil Market has so far into 2022 been on an upward trajectory, with the Brent and WTI hitting above USD 100/bbl mark for the first time in many years, well in line during pre-2014. The price has defied common expectations especially with the strong run of ESG...Your Industries Online