Oil Top Winner In 2022 WTI closed the year at $80.26 up slightly from $78 at the start of the year while the S&P continued to crash to 979.13 or 20.3% from 4,818.62 at the beginning of the year to close out at 3,839.49. This is one of the S&P's worse years in a long while.
https://stockcharts.com/freecharts/gallery.html?%24WTIC https://stockcharts.com/freecharts/gallery.html?%24SPX Oil and Gold were the top winners in a year when every other financial asset is tanking.
Oil has been on a bull run from a low of $33.64 in November 2020. Throughout the year oil climbed to a high $130.50 at the beginning of March.
Since March the United States has been artificially suppressing, temporarily the price of oil with release of oil from the Strategic Petroleum Reserve (SPR).
Despite the release of SPR oil inventories continue to decline as SPR oil has been unable to offset decline in global production and rising demand. In addition, the value of fiat currencies are declining relative to commodities due to unprecedented monetary expansion in the last two years.
A global supply deficit has been in place for several years now as OPEC+ no longer has spare capacity to increase production and shale production is declining despite increased drill rigs being fielded.
These are long term macro conditions that will continue into 2023 and beyond that cannot be suppressed much longer as SPR reserves are depleting and macro conditions are not incentivising producers to increase capital expenditures to increase production in the face of a number of headwinds like anti-fossil fuel measures, increasing exploration risk of finding new oil fields, windfall taxes, and transition to renewables and electric mobility.
In addition, geopolitical discord since Russia invaded the Ukraine last February there has been a global split with more oil going to the east to soak up Russian oil that has been G7 sanctioned and fuel China's and India’s growth especially since China has lifted its zero-COVID policy.
Conditions have been propelling oil’s bull run are only increasing like the filling of helium balloon. As soon as the SPR oil release string is cut on the balloon the oil price will continue its bull run.
Happy New Year