The cost of oil has gone up slightly; on the other hand, the price for West Texas Intermediate crude has reached $70.70 per barrel. With geopolitical tensions and the upcoming oil production possible changes in the global market, the market is mixed with the complex mix of geopolitics and potential global oil production shift. The slightly higher prices demand that the price of oil will continue rising especially due to the continued discussions between Russia and Ukraine that are posing uncertainty in the energy market. Thus, the negotiations of the two countries dominate the recognition of the existing problem.
One of the factors that augment the market’s situation is the anticipated growth of the Iraqi oil supply. It is reported that Iraq can add about 185,000 barrels per day to its current output output if and only if a pipeline to Turkey is repaired. On the other hand, the potential of this addition is being attenuated when Iraq intends to be among OPEC’s members that strictly observe the production limits. Hence, the oil cartel indirectly forces individual country’s projects to be the same as the collective ones in achieving the goals of the organization.
Furthermore, the oil market has been influenced by some of the inputs equally If the higher cost of oil is one side of the coin, the other is the broader economic indicators and policy decisions now being under consideration. After that, the tariffs on the newly exported goods, mainly from Mexico and Canada, into the US market the Trump government caught the attention of North American oil traders who were worried about the possible influence on the trading flow of the US with Mexico and Canada. Although these tariffs do not target oil directly, the energy sector’s interrelations in terms of transportation and utilities could lead to oil demand shortages and the increased cost of fuel.
Investors are keeping a close look at inventory reports and production data frequency from major oil-producing nations. The recent weeks have witnessed a swing in the US crude inventories, which is hurting the purchasing power of the buyers and is thereby generating extreme speculation for prices. The margin between global oil supply and demand is very narrow, and a noticeable deviation in either factor may cause a huge effect, leading to unstable pricing.
There is still little doubt that the long transition to renewable resources will continue to affect the oil markets for years to come. Although the demand for oil in the short term is firm, particularly, given the continued recovery of the global economy after the devastating pandemic, there are more and more questions emerging concerning the long-term demand trends. This doubt is leading the investment decisions in the oil industry which some of the leading companies are trying to curb it by including renewable energy projects in their portfolios.
While the oil market is addressing these numerous challenges and drafting up opportunities, analysts remain split when it comes to prices in the next few months. Somewhere the analysts stress the unrest among nations and lack of capacity in terms of crude is going to maintain the higher price, while other investors indicate the struggles in the economy and the progress of a cleaner renewable energy tier that would limit the price growth. The volatility of the oil market is very likely to keep being the case as these various factors are still the main players that determine the global energy landscape.
