On the Rising Oil Prices Patterns and Reasons for Selling

We already wrote that the level of geopolitical tension is now easiest to assess not even by the usual VIX Index (aka Fear Index), but by the dynamics of oil and gold prices. So yesterday, both assets were growing, hinting that we are entering the next local peak.

But imagine that common sense has not gone away. He is here, he is with us, and no one is going to start fighting either globally or locally. And after that, let's ask ourselves the question: "How fair is the current price of oil?"

Yes, in 2020-2021, OPEC+ confidently provided an imbalance in the oil market in favor of an artificial shortage of the asset. Which naturally pushed oil prices up. Then in the fall of 2021, Europe, and then the world, was covered by an energy crisis. Oil, being a basic energy asset, could not pass by and quite naturally grew in price.

The start of 2022 is the most powerful information attack at the global level on the subject of war between Russia and Ukraine. Which is fraught, for example, with sanctions against Russia and its hydrocarbons. Since Russia produces 10+ mb/d of oil, i.e. over 10% of the global supply on the market, the growth of the asset again looks natural and justified.

And everything seems to be logical and natural. And under the worst-case scenario, the trends will clearly continue and intensify. But back to the assumption that the world has not gone mad. Let's take the position of optimists.

So, in this case, it will be necessary to start at least to remove the "war premium" from the price of oil. And this is over $20 per barrel (see the dynamics of oil prices from December 2021 to the current time). Winter is coming to an end, and the Olympics are already over. That is, the energy crisis is rapidly losing its relevance: no one froze, there was enough gas for everyone, which means that there were fewer reasons to hysteria, to put it mildly. And don't forget about OPEC+. Since August 2021, production has increased by 400K b/d every month. That is, the supply on the market has already increased by 3+ million b/d.

This is what we are for. And to the fact that you can take advantage of the current situation and earn. The sale of oil should give at least 20-30 dollars of earnings per barrel. Well, if the pessimistic scenario works out, then there will be no time for losses on this transaction, because there will be more important problems.