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Oil prices have been fluctuating amid investor worries about the recent banking-sector problems, which would weigh on the global economy and limit demand for crude. However, the recent historic deal in which UBS, Switzerland’s largest bank, agreed to buy Credit Suisse in an effort to save the bank, has marginally stabilized oil prices.
The major central banks, including the U.S. Federal Reserve and European Central Bank, have indicated that they would enhance market liquidity and support other banks after the announcement of the agreement. Furthermore, the G7 nations seem unlikely to revise a $60-per-barrel price cap on Russian oil as planned, as there is no pressing desire among the group for an immediate review.
OPEC+, which includes the world’s top oil exporting countries and allies such as Russia, is set for a meeting on April 3. The group agreed in October to cut oil production targets by 2 million barrels per day until the end of 2023.
Despite recent fluctuations in oil prices, we note that investors should keep an eye on various contributing factors that influence oil prices in the long term. We recommend that investors keep track of the following trends that are expected to impact oil prices globally:
1. Geopolitical tensions: The oil market is highly sensitive to geopolitical tensions, especially those surrounding major oil-producing countries such as Saudi Arabia, Iran, and Venezuela. Any disturbances in oil supplies due to geopolitical risks will significantly push oil prices up.
2. Economic growth: The global economy’s growth rate is one of the most important factors that impact oil prices. Higher economic growth results in higher demand for crude, thereby increasing oil prices. Conversely, a slowdown in economic growth reduces demand, thereby lowering oil prices.
3. Oil supply: The current imbalance between oil supply and demand is causing significant pressure on oil prices. With the increasing production of shale oil in the U.S., the demand for conventional oil has fallen significantly. Additionally, OPEC+ has announced production cuts to boost prices, leading to a reduction in supply.
We also note that advancements in alternative energy sources such as solar, wind, and electric vehicles have the potential to disrupt the oil market by reducing demand. Therefore, it is essential that investors keep track of developments in renewable energy and their impact on oil prices.
In conclusion, we believe that investors should keep track of various contributing factors that influence the oil market in the long term. Our recommendation would be to focus on geopolitical risks, economic growth, oil supply, and developments in renewable energy. The oil market will remain volatile in the short-term. However, investors that keep track of the growth and expected trends will benefit in the long-term.#Oil #prices #stabilize #banking #deal #eases #worries #crude #appetite #Reuters