Analysis of oil prices in the current supply and demand context
Oil prices were somewhat stagnant under the pressure of China's covid restrictions, however expectations changed after a relaxation of these restrictions was on the horizon, which raises expectations of an increase in oil demand from Chinese oil consumption.
In addition to an increase in demand due to the relaxations, there is also an increase in oil imports from China due to the Lunar New Year vacations, all these changes in the demand for Chinese crude oil have led to the expectation of supply and demand behavior in other oil markets.
Expectations of a rebound in Chinese demand are the main bullish factor for oil markets at the moment, although traders were very pleased to take profits.
Despite consumer expectations, it is undoubtedly true that the rebound in oil prices is due to China's demand for oil, so producers will be very pleased with the profits made on the high prices experienced.
What this demand for oil from China denotes, is that being in a complete normality where traffic levels in public transport rise after the relaxation of the covid restrictions, leads us to think that any scenario where there is a difficulty to increase oil production by the various oil markets, oil prices could increase even more.
What I consider worrying in a possible speculative scenario is that at this stage of the development and innovation outcome, there is no defined technology that can cover the world energy demand that cannot be covered by the oil markets, it is known that the world oil supply has decreased, since nobody wants to risk investing in a company that should be in transition, but in reality is not even in transition, so I do not rule out a speculative market where there is an increasing demand and a decreasing oil supply that will cause prices to increase exorbitantly.
What is OPEC's role in all this economic imbalance resulting from the petroleum trade?
What I really think about this is that OPEC will try to take advantage of the high demand to sell oil without having to increase production, since increasing production would be very complex for the member countries, for example, it would mean reactivating inactive oil wells, incorporating technology and innovation, and all this entails additional costs that I believe its member countries would not be willing to incur, on the contrary, with the existing supply they can take advantage of the high oil prices and gradually adjust the possibility of increasing production.
Logically, in the macroeconomic scenario in oil production, oil producing countries that do not belong to OPEC are entering and could help to control the world oil demand by incorporating more millions of barrels of oil per day and be able to cover the world daily oil demand, for this we must closely follow the new discoveries of oilfields and the facilities in their extraction.
The other important thing to think about is that investors who wish to invest in oil must correctly forecast how the future of this market will be, because if the current trend continues, it may be useful to invest in oil, since a world energy crisis may be imminent. This is a point that must be carefully studied, since any type of restriction resulting from a new covid attack would cause the normality of society to be lost, triggering a drop in the demand for petroleum.