Oil industry looks to 2022

The price of crude oil has a history of volatility since trading on international stock exchanges and the New York Mercantile Exchange began around 40 years ago, but the past two years have been exceptionally high as global economies have tried to keep up. in the face of the COVID-19 pandemic.

The price of oil was trading around $ 60 a barrel in January 2020 just before the start of the pandemic. In April, demand for oil had collapsed to $ 15. Prices rebounded in 2021, hitting $ 84 for West Texas Intermediate in October. But another strain surfaced, Omicron, and traders lowered the price by 20% a week ago.

Even though the pandemic has been a key factor impacting oil prices, there are other factors such as global oil supply / production, international government policies and US government intervention.

The Organization of the Petroleum Exporting Countries has been trying to manage the oil markets for years. In 2020, OPEC and some non-member countries, including Russia, agreed to cut production in response to collapsing prices created by oversupply created by falling demand.

OPEC + met last week to discuss future production levels and agreed to a previously announced quota to increase production by 400,000 barrels per day.

President Joe Biden asked OPEC + to increase production further, but cartel members refused.

Following:Alex Mills: the strategic oil reserve created after the Arab oil embargo

Following:Alex Mills: Biden tries to manipulate the price of oil

Following:Alex Mills: The petroleum industry evolves in a context of change

Biden decided he would try to bring gasoline prices down by freeing up 50 million barrels of the strategic oil reserve. Releases are expected to start around early 2022 and last for around six months. Many analysts believe the versions will have little impact on pricing, but with so much uncertainty analysts find the current supply and demand situation troubling, and additional versions of the SPR are another factor to consider. take into account.

Although the pledges and commitments of countries participating in COP26 are not expected to have an immediate effect on the price of oil, this indicates that these countries will continue to advocate for further restrictions on fossil fuels (oil, natural gas, coal). ). Highlights of the meeting include support for an international market for carbon trading and commitments of $ 100 billion per year in support of low-income economies.

As 2021 draws to a close, many factors remain uncertain, but the economies of North America, Asia, India and Europe will see 5% growth and 2022 looks positive as well. Expanding economies mean increased demand for petroleum products. And as long as supply remains stable, prices should remain firm. The Energy Information Administration predicts that Brent, which trades on the international market, will average between $ 60 and $ 70 a barrel. West Texas Intermediate typically trades $ 2-4 less than Brent.

Alex Mills is the former president of the Texas Alliance of Energy Producers.

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