Crude Oil

Dear Ladies and Gentlemen

In July 2020, I did write a weekly on crude oil. My conclusion at the time was the following: «I believe we will see higher crude oil prices in 12  – 24 months from now, as inventory levels will decrease drastically in H2 ».

Massive Price Increase

In the meantime, crude oil prices have increased massively. For me, all of this happened almost too quickly. The interesting question is why the crude oil price did go up?

I think there are a few reasons for this. One one side, we hade a reduction of inventory as suggested in my weekly by then. Furthermore, OPEC+ was very disciplined in not increasing oil production by too much, unlike in the past. Then the weather phenomena  «la Nina» led to a cold winter and increased energy consumption. Also, President Biden’s call for green energy and restrictions for U.S. fossil energy production probably sparked speculation on crude oil shortage and added to the momentum. Increasing economic activity indeed was a sentiment moving factor, too.

What comes next?

Now, the question is, what comes next? Well, Ladies and Gentlemen, as disappointing as it may seem, I do not know.

However, I think we will see some consolidation; I would not be surprised to see OPEC+ acting less disciplined in the months to come, trying to sell as many barrels as possible on these relatively high levels. Currently, there seems to be a lot of positive sentiment reflected in the price of crude oil and this usually calls for lower prices, at least to some extent.

Please let me know your views!

Please feel free to share your ideas and thoughts with me, but please do not forget (instead of hitting the reply button) to send your messages to smk@incrementum.li.

Many thanks, indeed!

Ladies and Gentlemen, I wish you a good start to the day, a wonderful weekend, and above all, good health!

Yours truly,

Stefan M. Kremeth