Oil traders have built a record bearish position in oil futures, as they expect consumption growth to stay weak. So it would be no surprise at all to see prices fall towards the $50/bbl level.
Chemicals and the Economy
Oil prices head into a warning triangle again
OPEC+ countries have been playing the geopolitical card for the past 2 years. But their output cuts have allowed US producers to gain market share, with production up 1.2mbd. The hurricane season may support prices for a while. But the risks are all to the downside.
Hurricanes and Houthis pressure global supply chains and add to inflation risk
The Houthi attacks and increased hurricane risks highlight how geopolitics are replacing economics as the key driver for decisions. Global supply chains are increasingly being replaced by local-for-local operations as producers aim to improve reliability and control costs.
OPEC+ starts to refocus on market share as demand growth weakens
OPEC would have been better advised to keep prices low to reduce non-OPEC supply. Instead, they are likely to face some difficult pricing decisions later in the year, if global growth continues to slow.
Oil and financial markets start to wake up to geopolitical reality
The oil price has rallied 22% over the past 4 months, since it bottomed at $74/bbl. And slowly but surely, traders are being forced to realise that geopolitics are replacing economics as the key driver for world markets.
The energy transition powers ahead, as Electric Vehicle (EV) sales continue to ramp up
The mobility market is repeating the transformation seen a century ago when cars replaced stagecoaches. Autos are the world’s largest manufacturing industry, employing millions of people directly and in supply chains. Those companies that learn to ride the wave will likely be very successful for years to come.
Food prices set for further rise as energy and fertilizer costs increase
Economists might like to believe that inflation is somehow a monetary phenomenon. But as we are all likely to learn to our cost over the winter, food and energy prices are critical for most people. Oil prices are already rising. And food prices are joining them.
Energy markets could be heading towards a new crisis
It’s too soon to talk of an actual energy crisis. But as the charts showing Brent oil and European natural gas prices confirm, it is certainly time to start planning for the possibility: Oil prices have recently risen 25%. And Europe risks gas shortages if there is a cold winter
OPEC struggles with lower demand as the war accelerates the move to renewables
The good news for consumers is that the move to renewables is already set to save European consumers €100bn in 2021-23. The technologies needed in terms of wind, water, solar and storage can successfully deliver the cheaper and more reliable energy supply needed to support the global economy.
Clean energy set to squeeze fossil fuel demand as ‘the electrification of everything’ continues
Portugal is showing the way. Despite 6 months of drought last year, 57% of its electricity came from renewables. And its clean energy focus means it is becoming “one of the cheapest markets in Europe”. CO2 emissions will also have reduced by 75% in 2030 versus 2021.
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