May 14, 2022

” Warning !! Oil shock in progress! » Editorial by Charles SANNAT

My dear impertinents, dear impertinents,

Call for witnesses. I need your friendly help. Indeed I would like to take stock of the announced price increases to try to quantify the inflation to come in real life. Also, if you have received letters from your suppliers announcing price revisions, I am interested. You can write to me and send your documents to the address [email protected] they will not be published without your express and prior agreement of course. Thanks for your help.

Watch out friends. “Oil: Brent at its highest since 2014, boosted by supply tensions”

“The supply disruptions in Libya and Nigeria and the rise in demand explain this increase, among other things.The supply disruptions in Libya and Nigeria and the increase in demand explain this increase, among other things. The price of a barrel of Brent from the North Sea has reached nearly 87 dollars, and could still climb”.

“The price of Brent oil hit a seven-year high on Tuesday, boosted by supply disruptions in Libya and Nigeria among others, and by a pick-up in demand, despite the Omicron variant. The price of a barrel of Brent from the North Sea moved to 86.95 dollars on Tuesday (+0.54%), thus exceeding its record of October 2014 (86.74 dollars).

Between production interruptions “in Libya, Nigeria, Angola, Ecuador and, more recently, in Canada due to extreme cold”, according to Hussein Sayed, analyst at Exinity. “Markets remain focused on the delicate balance between supply and demand, which seems to have quite a significant impact on price fluctuations throughout the post-pandemic economic recovery,” remarks Walid Koudmani, analyst at XTB » .

Finally, we must not forget the geopolitical risk with the likelihood of a conflict between Russia and Ukraine which could have a terrible impact on Europe’s supply of Russian gas.

On the side of oil producers, OPEC + nobody seems to want to produce more to lower prices. There is great logic in this. First of all, the losses of the oil-producing countries were considerable during the confinements and in particular of the first with oil prices which became negative.

Then, with the ongoing energy transition, fuel needs will decrease considerably, so it is not profitable for the oil-producing countries or even the major oil companies to go and invest billions of dollars in risky and unsustainable projects.

This means that the ecological transition is terribly inflationary on the prices of fossil energy. We will continue to extract but always less and always more and more expensive. No one will invest in new wells, no one will invest in new refineries.

And finally, because it is the programmed “end” of fossil fuels, the producing countries which also have to make their transition to an economy without oil and without the gains from the sale of black gold, have no interest in selling off the last barrels they can sell.

Oil: Goldman Sachs sees the barrel of Brent at 100 dollars in the third quarter

It is in this context that the bank Goldman Sachs “expects the price of Brent LCOc1 per barrel to reach $100 in the second half of this year, suggesting a less than feared impact of the Omicron variant on demand, combined with increased supply disruption. “This has kept the global oil market in a bigger deficit” than expected, analysts at the US bank wrote in a note released on Monday. »

Goldman Sachs’ analysis lacks depth in my opinion and does not advance the real factors that make this rise in oil prices lasting and significant. There are certainly the short-term disruptions mentioned above, but that is not the real structural problem we are facing.

The real problem is the under-investment in the oil market. This under-investment is likely to be permanent.

There will be less and less oil, and the demand even if it drops will remain at high levels because there is a “recovery” of the world economy after the confinements.

The only thing that could drive oil down is a nasty new variant that would require shutting down economies and shutting down our trade.

Remember that in 2008, the subprime mortgage crisis began at the very beginning with rising interest rates and soaring oil prices.

Our economy needs abundant and inexpensive energy.

It is already too late, but all is not lost.

Prepare yourselves !

Charles SANNAT

“Insolence” means “impertinence” in latin
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Source Boursorama.com here