Falling oil prices defy forecasts. But what about the next chapter?

When oil prices fall, many costs for industry and agriculture, including chemicals and fertilizers, usually follow. And shipping becomes...

When oil prices fall, many costs for industry and agriculture, including chemicals and fertilizers, usually follow. And shipping becomes more economical. But when they rise sharply, as they did in 2008 and the 1970s, they tend to raise other prices and drag down the overall economy. And political fallout often ensues.

Predicting energy prices has always been a fool’s game because there are so many factors, including the expectations of traders who buy and sell fuel, the political fortunes of unstable producing countries like Venezuela, Nigeria and Libya, and the investment decisions of public and private oil companies. business leaders.

Today, these complexities are particularly difficult to assess.

“(When) will the oil bulls start revising their forecasts down?” was the title of a recent Citigroup report on commodities. With a global recession “on the horizon”, he said, “which is more likely, a robust hurricane season, seeing prices soar? A return of Iranian barrels? Or a recession, with oil in the $60s by year-end or early 2023?” If a barrel of oil fell to $60 a barrel, average U.S. gasoline prices would likely fall by at least another dollar a gallon.

But days after Citi’s projections, Goldman Sachs Commodities Research predicted a rebound in prices as fuel demand rebounds. “We see growing tail risks to commodity prices inherent in the scenario of sustained growth, low unemployment and stabilizing household purchasing power,” the report concludes.

The war in Ukraine remains a major variable in the global supply outlook as Russia normally supplies one in 10 barrels of the world’s 100 million barrel per day market. Since the invasion of Ukraine, daily Russian exports have fallen by around 580,000 barrels. European sanctions on Russian oil are expected to tighten further by February, reducing daily Russian exports by another 600,000 barrels.

And as Russia further tightens its grip on natural gas sales to Europe in retaliation for sanctions, European utilities will be forced to burn more oil to replace gas.

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Newsrust - US Top News: Falling oil prices defy forecasts. But what about the next chapter?
Falling oil prices defy forecasts. But what about the next chapter?
Newsrust - US Top News
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