Crude Oil Commentary

NB*: since global commodities are priced in US dollars, the strength/weakness of the dollar is
quintessential when assessing the performance of these precious commodities such as crude oil.
2017 :
consumption; oil demand boomed as it continued an oil price rally that began around 2016. To
gauge the magnitude of the change in demand, it is a 1,7% improvement of a 1.6% average (eni,
2018).
Production: The United States became the biggest non-OPEC supplier of oil. OPEC (that accounts for
42% of global oil supply) contracted its production as per an agreement concluded in November
2016 (eni, 2018)
Price changes: steady increase in price throughout the y ear.
2018:
Consumption: Global oil demand

continued to grow (eni, 2019 )
Production: 2018 recorded an overall

growth in production of 2.5 million
barrels per day, 88% of this supply was
provided by uncle sam, aka The United States of America which doubled its oil export volumes (eni,
2019). On the contrary; OPEC registered zero growth as geopolitical tensions in Iran and Venezuela
distorted production.
Price changes: little change, a slow in momentum, perhaps a new trend is emerging.
2019:
Consumption: in the long term, oil is meant to reduce its importance as an energy source but for
many years it will continue to play a significant role on the global economy.
Production: OPEC supply decreased by 5%, this was the result of sanctions that were imposed by
the United States on Iran and Venezuela. The United States became a net exporter of oil for the first
time since 1947.
Price change: oil had a steady decline during the year, despite a lower supply that would logically
result to higher prices, prices continued their plummet due to market cycles. The event to note is an
aggressive monetary policy from the United States that resulted to a stronger dollar.
2020:
Consumption:
In 2020 world oil demand collapsed (nearly 9%

vs 2019). This is illustrated in the graph adjacent
by a shift in quantity demanded from Q0 to Q1
and the subsequent shift of the demand of the
demand curve and from D0 to D1. Considering
that this is a market and producers often react
to changes in market conditions, there was a
consensus for a lower price and lower
production of crude oil. One of the key drivers
of such price action is the COVID-19 pandemic.
The COVID-19 pandemic came along with
restrictions on travel and hence the major
consensus on much discounted crude oil price.
Source: OpenStaxCollege, CC BY 4.0
Production: To compliment the reduction in demand, OPEC+ cut its crude oil production even
further, its global counterparts reflected the same actions. World oil production declined by 6,5% in
2020 (eni, 2021)
Price Change: A very sharp decline in oil prices throughout the year. A rambunctious response from
the market reflecting free trade and choices.
2021:
Consumption: Oil prices rallied up by 70% in 2021 as demand recovered, to the extent of reflecting
+6.1% gain against its prior year but remained below pre-pandemic levels.
Production: as a very responsive producer of oil, OPEC+ monitored the situation closely and began to
relieve some of the aggressive policies with regards to their oil production and reserves.
Subsequently, world oil production also followed with improvement.
Price Change: An uncontrollable rebound in oil prices. Oil prices began to rally in seek of a price roof
as supply chain recovery was unpredictable coupled with previously oil deprived consumers coming
back onto their feet.
2022:
Consumption: Consumers continued to quench their engines with oil as global economic activity
rebounded to post pandemic levels. Furthermore, the accommodative monetary policy from the last
2 years opened window for smaller producers to purchase heavier machinery and subsequently
demand more oil.
Production: OPEC and all relevant producers continued to capitalise on a rising market by bolstering
their production. OPEC decided to produce oil and keep as reserves for harsher times, as we have
just endured with the COVID-19 pandemic. This is evident in the very first illustration of this
document.
Price change: Ceteris parabus (since no factors changed) oil continued its climb toward the $100 per
barrel mark. Closing into the year; prices have been ranging in this region and likely to return to a
previous high or low.
Forecast
2023;
Consumption; as economic trends tend to persist as opposed to reversing, analysts can expect oil
consumption to remain on the rise. There is however a very energetic and rambunctious alternate
for household oil consumption as renewable energy is on the rise of preference. This further builds a
case for comparing the two goods using a substitute goods model.
Production; n/a
Price change; the current market environment is based around the theme of a stronger dollar. This is
evident in the FEDs monetary policy standing as well its rising bond prices. This policy standing
serves as a roof for oil prices and give it little window for an upward breakthrough in price. To be
severely technical; above is the price chart of gold in which each bar represents a week’s worth of
movement. Price is currently retracing the massive price drop from 2022 and a continuation is
around the corner. This is further evident through price sitting below 2 moving averages. This
premise can lastly be justified by the lack of follow through when price recently broke above the
downward trendline.
2024;
Consumption: oil anticipated to become an industrial product as opposed to a household product.

This will be first evident in the developed economies and will subsequently be followed by emerging
economies.
Production: n/a
Price change: in the event that the American Fed cuts back on interest rates and accommodates
booming economic activity, oil prices would be set for another upward charge as the value of the
dollar weakens.
Written by: Mphatso Manyamba

Crude Oil Commentary

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NB*: since global commodities are priced in US dollars, the strength/weakness of the dollar is

Price changes: steady increase in price throughout the y ear.

Consumption: Global oil demand

Production: 2018 recorded an overall

In 2020 world oil demand collapsed (nearly 9%

Source: OpenStaxCollege, CC BY 4.0

Consumption: oil anticipated to become an industrial product as opposed to a household product.

Written by: Mphatso Manyamba

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