Thread on the most important events in the oil market in 2021:
1- What constitutes an important event?
An event that is NOT common, different from the past, & sometimes different from the prevailing conventional wisdom that has ramifications on several fronts & for years to come
1- What constitutes an important event?
An event that is NOT common, different from the past, & sometimes different from the prevailing conventional wisdom that has ramifications on several fronts & for years to come
2- That immediately excludes many of the expected trends: increasing prices, production, demand, rigs, revenues, profits, stock prices, etc. It also excludes The Biden Administration's requests for OPEC to increase production and the use of the SPR.
#Oil #OOTT #OPEC
#Oil #OOTT #OPEC
3- The most important event in 2021 with a significant impact on oil market balances in 2021 & beyond is the change in #oil market structure & the role of OPEC+ leaders in global energy markets & climate negotiations. That changed the economics and the politics of the oil market.
4- 1st is the refusal of the major oil-producing countries with excess spare capacity within OPEC+ to increase production to compensate for those members who are not able to increase production. This is a new development in the role of OPEC & OPEC+. Will it last? It depends!
5- 2ed is the proactive and preemptive role oil producers played in climate negotiations in the G20 and COP26. The major investments made in renewable energy and new green technology, especially in the UAE and Saudi Arabia are evidence of the new role.
6- The second most important event in 2021 is the energy crisis in Europe, China, India, Brazil, & Western US that has nothing to do with oil but oil ended up easing the crisis!
The level of substitution among various energy sources was beyond amazing. Perfect Econ 101 example.
The level of substitution among various energy sources was beyond amazing. Perfect Econ 101 example.
7- The third most important point is the role of hedging played in the shale industry & its impact on investment & steep declines in oil prices. Earlier hedging at low prices limited revenues & cash flow as oil prices doubled, while delta hedging led to severe declines in prices.
8- Conclusion: Tighter markets and higher volatility. #Oil #OPEC #OOTT #SaudiArabia #Russia #energycrisis
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