The concluding paragraph:
All of this rhetorical flim-flam by Germany and the E.U. has resulted in an oil price that remains way above where it should be, given the confluence of multiple bearish factors currently at play.
- On the supply side there remain:
- definite pledges from the U.S. Energy Secretary, Jennifer Granholm, to engineer a “significant increase” in domestic energy supply by the end of the year,
- with the U.S. also working to identify at least three million bpd of new global oil supply.
- There remains the prospect of further strategic petroleum releases as and when required both from the U.S. and from member countries of the IEA, and
- of a new ‘nuclear deal’ with Iran as the U.S. is still open to the idea.
- Additionally, the U.S.’s ability to pressure OPEC into increasing production has been increased by its resuscitating the threat of the ‘NOPEC’ Bill.
- On the demand side, there remains:
- further likely destruction from the COVID-related lockdowns across China, and
- no prospect of its ‘zero-COVID’ policy being meaningfully relaxed, and
- of a series of U.S. interest rate hikes stifling economic growth elsewhere.
It is apposite to note at this point that even without these bearish factors in play, Brent crude was trading at around US$65 pb before the real Russia-Ukraine war premium was kicked in by the smart money in September 2021 when U.S. intelligence officers started to notice highly unusual Russian military movements on the Ukraine border after the conclusion of the joint Russia-Belarus military exercises that had taken place.
$65 oil? One of two things?
- $65 oil will be the result of those "things" Mr Watkins brings up plus a historic recession and huge demand destruction driving oil back to $65; or,
- $65 will be based on more than enough oil being available, and the global economy will take off
Bottom line: fool's errand to predict the price of oil.
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