How oil prices go this year is critical

There are many uncertainties and variables affecting international crude oil prices in 2022, but this year has its specific significance
in the timeline of cyclical changes in international crude oil prices.

Since the middle of 2014, international crude oil prices have been running from medium-term cyclical highs downward, to low shocks, and then to recovery for more than 7 years, leaving an important role in 2022 from the timeline, which is destined to be a crucial time node
in 2022 in this round of medium-term cyclical international crude oil price changes.

The pandemic has eased, demand continues to recover, and will return to pre-pandemic growth
.
At the beginning of 2020, the novel coronavirus outbreak broke out
.
For more than two years, the pandemic has had an unprecedented impact
on oil demand.
Entering 2021, the impact of the epidemic on oil demand is gradually fading
.
Global oil demand grew by 5.
4 million bpd in 2021 and is expected to grow by a further 3.
3 million bpd in 2022, returning to pre-pandemic consumption levels
, according to the International Energy Agency's December 2021 Oil Market Report.
It is expected that after February 2022, the global oil consumption losses caused by the new crown epidemic will fully recover to the same period before the pandemic, and then return to the normal demand growth track
.

Supply growth is slow, and spare capacity has entered a tight state
.
In the second half of 2021, an unexpected global energy supply shortage suddenly arrived, coal prices contrary to the direction of low-carbon energy transformation hit a record high, LNG prices hit a record high, and international crude oil prices broke through the $70/barrel and $80/barrel thresholds in one fell swoop, approaching $90
/barrel.
At present, international crude oil prices have entered a relatively comfortable position in the industry, but the growth of global crude oil production is slow, and the speed of destocking continues to run
rapidly.
According to the International Energy Agency, commercial oil inventories in the Economic Cooperation Organization fell by 21.
2 million barrels to 2.
737 billion barrels in October 2021, down 243 million barrels from the 2016-2020 average, and forecast a further decline of 23 million barrels to 2.
714 billion barrels in November, close to the level of the early days of the sharp rise in inventories in 2014
.
However, global crude oil surplus capacity exists mainly in
OPEC members.
On January 6, 2022, Reuters released survey data showing that OPEC's implementation rate of production cuts rose to 127% in December 2021 from 120%
in November.
This means that the organization's crude oil production has not reached the planned target
for 7 consecutive months.
In addition to geopolitical factors, another major reason for the continued failure to achieve production targets should be the limited
scale of its actual production capacity.

The geopolitical situation is complicated, driving prices to volatile
sharply.
Geopolitics has long played a very important role in international crude oil price changes, especially in the short-term price changes, and few other factors can match
it.
At the beginning of the new year 2022, riots broke out in Kazakhstan, the world's largest landlocked country
.
The main trigger for the incident was the government's increase in the price of liquefied petroleum gas, which led to strong dissatisfaction
among the people.
The country's tensions have been reflected
in the changes in international crude oil prices in the first week of 2022.
The situation in the country reflects that the global energy supply shortage that began in the second half of 2021 has driven the global prices of traditional energy such as coal, natural gas, and oil to continue to rise rapidly, the severe inflation situation, coupled with the inconvenience caused by the epidemic to people's travel, work and life, as well as the decline in quality of life, the world economic development and political stability are facing great challenges and potential risks are increasing
。 Not only the Kazakh incident, political turmoil, economic problems will still exist for a long time in many countries, and the impact of geopolitics on international crude oil prices will always play a role, but as the supply and demand situation shifts from loose to tight balance, the performance is more intense
.

In short, there are many uncertainties and variables affecting international crude oil prices in 2022
.
However, this year, the timeline of cyclical changes in international crude oil prices has its specific significance, that is, the new coronavirus epidemic has suppressed global oil consumption demand, but also inhibited global oil upstream exploration and development investment activities, which has a huge impact on the future oil demand growth expectations, coupled with the past years of insufficient oil upstream investment, insufficient new production capacity, with the continuous natural decline in oil-producing fields, the future can be expected to be in the time when the global oil supply and demand situation will be relatively loose to weak balance.
Tight balance until insufficient supply, international crude oil prices will also enter a new cycle
.
The average of the core trend line of the annual trend of the international benchmark crude oil (based on WTI) futures price calculated through the model is 75 US dollars / barrel, and the range is between 68 and 78 US dollars / barrel, and the chance of approaching the lower limit of the range downward is slightly greater than the chance
of approaching the upper limit of the range upward.