As 2021 close, investors reassess their portfolios and gauge where adjustments are needed. The oil market in 2022 is expected to be impacted by the supply deficit and recovery of the pandemic.
A combination of the pandemic decreasing oil demand, China’s slowing economic growth, and a drop in US factory output has caused many to question the value of the oil market in 2021. In addition, a supply-demand imbalance triggered rising energy prices around the world.
As vaccinations roll out, economies have begun to operate at full capacity again and the demand for energy is increasing – but is not always readily available. As the economy resumes stability, oil is expected to gain, but caution is advised.
Opportunities in the Oil Market in 2022
Higher oil prices have a positive impact on oil stock margins and profits. Those that are currently invested in oil are in a good position as the oil price remains near multi-year highs.
The world is experiencing an energy supply crunch which has led to climbing prices over the past couple of months. Consider that Brent crude has risen by 19% since the start of September, and WTI has gained approximately 21%.
Around the world, oil demand is projected to rise, with India’s demand expected to be the fastest rising, reaching 10 million barrels per day by 2030.
Currently, oil prices are expected to see continuous, modest gains for the rest of 2021 and into 2022. One analyst from the Organization of the Petroleum Exporting Countries (OPEC) wrote, “The pace in recovery in oil demand is now assumed to be stronger and mostly taking place in 2022.”
Threats in the Oil Market in 2022
Amid the logical projections and calculated investments, there are plenty of exaggerated predictions on the energy crunch. Investing in the oil market demands a savvy mind that is immune to panicked reactions.
One trader is betting that oil will rise to a record $200 a barrel, yet the likelihood is low. The oil market’s recovery from the pandemic has been patchy at best, and the upcoming winter months will offer increased insight into how the stock stands in the year that follows.
Big players in the stock market are offering conflicting opinions on the future of oil as a commodity. For example, OPEC expects the demand for oil to rebound in 2022, reaching pre-pandemic levels. However, this projection is viewed as bullish by the more conservative bloc (and allies) who plan to continue gradually raising crude output.
Another concern to consider is the growing awareness of climate change. It’s suspected that the combination of growing public awareness and the inclusion of climate matters on political agendas in 2021 contributed to the brief drop in the price of crude oil. As the economy stabilizes, climate change may be prioritized yet again, negatively impacting big oil companies.
Oil Stocks Demand Regular Assessment
Trading volatile commodities, such as oil, demands regular assessment. While there have been periods of relative calm, there are also quarters that are highly volatile.
Despite growing concerns about the negative impact on the environment, the world economy is still largely dependent on fossil fuels. Unlike oil prices that dropped during the pandemic, renewable energy consumption increased and the future of renewable energy has been accelerated.
Note: Please do not invest money or assets in the financial markets that you cannot afford to lose. This article should not be construed to be investment advice and is for information purposes only.