Multiple factors disrupt the crude oil market

After the crude oil price bottomed out in December 2021, oil prices entered an upward channel
due to factors such as the geopolitical situation and the mismatch between the supply and demand sides of crude oil.

The main reason for the recent rise in oil prices can be understood
from both supply and demand.
From the supply side, according to the latest monthly report of the Organization of the Petroleum Exporting Countries (OPEC), OPEC crude oil production increased by 64,000 b/d in January this year, lower than the 250,000 b/d increase promised in the OPEC+ agreement, and the supply was less than expected to drive the international crude oil market price upward
.
In addition, oil prices have also risen
sharply due to geopolitical tensions in major oil producing countries that have triggered market concerns about the stability of crude oil supply.

From the demand side, with the acceleration of global new crown vaccination progress, the impact of the epidemic has weakened, driving the current global market crude oil demand to gradually recover
.
According to OPEC data, world oil demand in the fourth quarter of 2021 totaled 99.
77 million barrels per day, which has recovered to close to pre-pandemic levels
.
Although the impact of the current epidemic on the economies of countries around the world has not ended, the impact of the current round of the epidemic on the economy is lower than expected
.
The weakening of the impact of the epidemic has led to an increase in travel demand, and the rapid recovery of offline service industries such as tourism has led to a recovery in crude oil demand, in addition, the recovery of overseas production will also boost the demand
for crude oil.

At the same time, the misalignment of supply and demand has also made crude oil inventories currently low
.
In the United States, for example, U.
S.
commercial crude inventories fell by 2.
708 million barrels to 410 million barrels in January, the lowest level
since October 2018.
The misalignment of crude oil supply and demand and low inventories have jointly promoted the recovery of crude oil prices
.

Looking ahead, the global economy is still in the process of continuous recovery, the recovery of overseas production and the weakening of the impact of the epidemic still support oil demand, and it is difficult for international oil prices to fall
sharply.

Although the recent OPEC+ meeting insisted on maintaining the increase in production by 400,000 b/d, from past experience, the subsequent major oil producers may not be able to fulfill the increase as expected
.
From an investment perspective, as the international community reaches a consensus on addressing climate change risks and strengthening environmental protection, especially as more institutions incorporate environmental, social and governance issues into investment decisions, investment in traditional energy tends to decline, and underinvestment may lead to significant industry input cuts, resulting in slow capacity recovery and exacerbating the shortage of
crude oil supply.

In terms of supply and demand structure, although increasing the proportion of clean energy consumption occupies an important position in the future development planning of various countries, it takes a long time for
clean energy to replace traditional fossil energy.
Therefore, in the short term, it is difficult for clean energy to have a significant impact on the supply and demand structure of traditional fossil energy, and it is difficult to have a substantial impact
on crude oil prices.
Moreover, the exploitation cycle of traditional oil and gas resources is long, and the current low inventory situation is difficult to alleviate quickly under the constraints of slow supply repair, while under the economic stability, the demand for crude oil consumption is still increasing, and related factors will support
oil prices.