British media article: The oil market faces three major uncertainties

The British "Economist" website published an article entitled "Three uncertainties loom over the oil market" on March 20, and the full excerpt is as follows:

Nearly a month after the Russian-Ukrainian conflict led to a spike in oil prices, the oil market, one of the world's most important commodity markets, has been in turmoil and shows little sign
of end.
Brent crude was around $108 a barrel on March 18, still above the $94 mark
at the start of the war.
But over the past two weeks, oil prices have fallen from a peak of $128 to a low of $
98.

The volatility of oil prices reflects the interplay of various geopolitical and economic forces affecting the world today, from wars to rate hikes to the COVID-19 pandemic
.
Even beyond the impact of the conflict in Ukraine, there are three major sources
of uncertainty in the oil market.

First, what do OPEC members do when Western sanctions are starting to take effect and countries avoid using Russian-made oil
?

The United States has banned the import of Russian oil; Even in countries that haven't done the same, potential buyers have had trouble doing business with Russian financial intermediaries who have been cut off from global financial pipelines because of sanctions and may fear new sanctions
.

The IEA said on March 16 that from April onwards, the gap in the international market could reach 3 million barrels of oil
per day.
Last year, the world consumed an average of about 98 million barrels of oil
per day.

The spread between the benchmark Brent oil price and the Urals oil price best illustrates the disruption
to global markets.
The spread was around 60 cents a barrel on Jan.
31, and by March 18, it had widened to nearly $
30.

This leaves most of the power in the hands of the two countries most capable of filling most of the oil gap: Saudi Arabia and the United Arab Emirates
.
So far, both countries have rejected requests
for a significant increase in production.

The second uncertainty has to do
with whether U.
S.
shale oil production can meet the supply gap.
During the first shale boom, from about 2010 to 2015, U.
S.
oil production surged that led to a plunge in oil prices and weakened
OPEC's power.
But since then, the U.
S.
economic situation has changed dramatically, leaving analysts and industry insiders wondering if shale oil can meet the challenge
.

The current financing environment is less encouraging
compared to the boom period from 2010 to 2015.
The Fed is expected to raise interest rates several times this year and next: the two-year Treasury yield is currently just under 2 percent, compared with less than 1 percent
for much of that year's boom.
Another factor limiting production comes from the U.
S.
labor market
, which is in short supply.
In February, just over 128,000 people in the United States were engaged in oil and gas extraction, far fewer than the more than 200,000
at the end of 2014.
Given the overall unemployment rate of only 3.
8 percent and the difficulty of employers filling existing job vacancies, finding tens of thousands of workers across the U.
S.
will be extremely difficult
.

Attitudes in the shale oil industry have also changed
.
U.
S.
producers and their potential creditors are now more cautious
about borrowing.
Banks and asset managers are subject to stricter environmental standards
.
This is a factor
that leads to rising costs.

The third factor in oil price volatility is related
to demand.
Analysts at S&P Global Platts in the United States believe that the epidemic may reduce daily oil demand in March by 650,000 barrels, roughly equivalent to Venezuela's oil production per day
.

The OPEC's machination, the calculations of the U.
S.
shale oil industry, and oil demand – if we are to defuse the increasingly volatile oil market, these sources of uncertainty must be neutralized
.
Any of the above three is usually enough to cause large fluctuations in prices, and together they form an unstable complex
.