OPINION
Market Rating Before FOMC MeetingJan 31
Oil Market Outlook: Will the Downturn Be Permanent?
Recently, oil prices in global markets have been closely monitored in terms of inflationary outlook. Especially, it is a matter of curiosity how the tightening path of global central banks in response to the sanctions imposed by the G-7 countries on Russia will affect oil prices.
On February 24, 2022, the military operation launched by Russian President Vladimir Putin with the aim of “purifying Ukraine from military and Nazism” has taken its place on the list of important geopolitical crises that have caused major shifts in the global oil markets from past to present.
The price of crude oil, which was around $90 per barrel before the war, started to rise due to the interruptions in supply, as the developed countries began to impose an embargo on oil, which is Russia's important source of income, as a result of Russia's heavy attacks on Ukraine. On March 8, crude oil prices rose to the highest levels in nearly 14 years, with an increase of more than %40 in a short period to $127.
If we go back further, on March 11, 2020, after the World Health Organization (WHO) declared a new type of coronavirus pandemic, the restriction measures taken weakened economic activity, and crude oil prices fell to $8.45 a barrel due to the global decline in energy consumption, had recovered to the $90 band within 2 years before the Ukraine war.
Recently, there has been a retreat path in oil prices. Aside from the sanctions imposed on Russian oil, the effect of the closure measures implemented in China, which is the world's largest oil importer, as the coronavirus cases could not be brought under control as desired, forces oil prices, which have been above $100 a barrel for a long time, to return to pre-war levels.
Here, in addition to the recession concerns for developed countries, the central banks of developed countries, especially the USA entering into a tightening cycle against high inflation has made a huge contribution. In addition, at the last meeting, the decision of the Organization of Petroleum Exporting Countries (OPEC) to reduce oil production by 100 thousand barrels per day for October and the surplus of US crude oil stocks in the last 2 weeks have a share.
On February 24, 2022, the military operation launched by Russian President Vladimir Putin with the aim of “purifying Ukraine from military and Nazism” has taken its place on the list of important geopolitical crises that have caused major shifts in the global oil markets from past to present.
The price of crude oil, which was around $90 per barrel before the war, started to rise due to the interruptions in supply, as the developed countries began to impose an embargo on oil, which is Russia's important source of income, as a result of Russia's heavy attacks on Ukraine. On March 8, crude oil prices rose to the highest levels in nearly 14 years, with an increase of more than %40 in a short period to $127.
If we go back further, on March 11, 2020, after the World Health Organization (WHO) declared a new type of coronavirus pandemic, the restriction measures taken weakened economic activity, and crude oil prices fell to $8.45 a barrel due to the global decline in energy consumption, had recovered to the $90 band within 2 years before the Ukraine war.
Recently, there has been a retreat path in oil prices. Aside from the sanctions imposed on Russian oil, the effect of the closure measures implemented in China, which is the world's largest oil importer, as the coronavirus cases could not be brought under control as desired, forces oil prices, which have been above $100 a barrel for a long time, to return to pre-war levels.
Here, in addition to the recession concerns for developed countries, the central banks of developed countries, especially the USA entering into a tightening cycle against high inflation has made a huge contribution. In addition, at the last meeting, the decision of the Organization of Petroleum Exporting Countries (OPEC) to reduce oil production by 100 thousand barrels per day for October and the surplus of US crude oil stocks in the last 2 weeks have a share.
At this point, on September 8, crude oil declined to levels before the start of the Ukrainian war at $80.93. USOIL is currently priced at $88. Brent oil, which started the day at $ 93.82, is currently at $93.20 with a decrease of about %0.70.
As a result, oil prices, which are trying to gradually leave behind the pricing brought by the Russia-Ukraine war, may continue to retreat moderately as a result of the developed countries' continuing hawkish stance against high inflation and the risks of recession in the global markets.
Some sources close to the subject had made various estimates about oil prices. While Bank of America argues that developed countries' interest rate hike paths could bring oil prices down by around %30 by the end of the year, New York-based finance company JPMorgan also said that if Russia cut oil production in response to sanctions, oil prices could make a huge jump and reach as high as $380 during the year. S&P Global Ratings estimated that year-end oil prices would be around $90. Finally, in the report of the Energy Information Management Administration (EIA), it was predicted that the price of brent and crude oil per barrel for this year will be in the band of $104, and in 2023 it will be priced at the level of $95.
