Home » Oil: prices will remain high in the coming months, but in the course of 2022 the music will change (analysts)

Oil: prices will remain high in the coming months, but in the course of 2022 the music will change (analysts)

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Oil prices could remain high and rise again in the coming months, and then fall in the course of 2022. This is the prediction of T. Rowe Price: “Although we see the potential risk of a further rise in oil prices in the next quarter or two, our belief that the commodity market will remain bearish over the long term remains unchanged, ”said Shinwoo Kim, Portfolio Manager, Global Natural Resources Equity Strategy asset management.

According to the expert, crude oil prices have the potential to remain high in the short term. Indeed, even if the WTI has risen to levels that should be sufficient to generate the supply response needed to balance the market, it still takes time for energy producers to increase activity and production, due to the pandemic and difficulties in mobilizing people and machinery after suffering two oil price plunges in the past five years.

Furthermore, rising prices in international gas markets threaten to increase the demand for oil as an alternative raw material in electricity generation and industrial applications. However, according to the expert, when the demand for heating decreases in the spring and some of the temporary factors that have tightened the natural gas market begin to decline, stock levels will rebuild and prices will normalize, reducing the attractiveness of crude oil. as a replacement fuel.

In short, oil would not have the fundamentals to support a prolonged bull market. “Even during a global economic recovery, higher oil prices are unlikely to prove sustainable and, in our view, at some point in the next year they should begin to decline towards mid-cycle levels,” warns T. Rowe Price. As a result, we remain selective in our investments in the energy and mining sectors. “

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