Catalysts For Oil
Oil declined on speculation recent strength in U.S. economy will give the Fed room to hike more than 50 basis points in December and a build in U.S. refined products indicating a decline in demand.
However, there are bigger near term drivers that will push prices back up:
- China opening up with relaxation of COVID restrictions
- A decline in Russian oil coming to market after 5 December
- Pre-cap Russian oil loaded before 5 December completing working through markets
- The Baltic Dry Index is up 1.25% indicating rise in global shipping going into Christmas
- Increasing demand for winter heating
- Declining oil inventories
- End of draw down on U.S. Strategic Reserve
- Asian consumers ramping up imports to build up their reserves as they can now see the need for energy security. This will reduce oil available for on-going consumption in rest of world: https://oilprice.com/Latest-Energy-News/World-News/Saudi-Arabia-Vows-To-Stick-With-China-As-An-Energy-Partner.html
- declining rate of increase in shale production
- reluctance to increase capex in oil industry
- banks unwilling to fund fossil fuels