First Citizens BancShares announced Monday that it will acquire the deposits and loans of failed Silicon Valley Bank, closing a chapter in the crisis of confidence that has shaken the financial markets. There is also hope for additional support for bank financing, following reports that the US authorities were in the early stages of deliberation on extending emergency lending facilities.
These new positive outlooks boost crude oil prices, because allay fears of an impending recession or crisiswhich would drop demand and put downward pressure on prices.
Oil prices were also helped by plans to Putin to deploy tactical nuclear weapons in Belarus. On Tuesday, supply disruption risks in Iraqi Kurdistan and hopes that turmoil in the banking sector will be contained continued to drive prices up.
For his part, Russian Deputy Prime Minister Alexander Novak has stated that Moscow is close to reaching its goal of reducing crude oil production by 500,000 barrels per day (bpd), up to about 9.5 million bpd.
However, Russia’s crude exports are expected to hold steady as it cuts refinery output in April, according to data from industry sources and Reuters calculations.
The focus is now on China, which will account for around 40% of increased global demand for oil this year as its economy emerges from strict lockdown measures, but increased use will not bring prices back to 2022 levels, consultancy Wood Mackenzie said on Thursday.
In a base-case scenario, China’s economy will grow 5.5% this year after it lifted its COVID containment strategy, WoodMac said in a report. This would be equivalent to 1 million barrels per day (bpd) of a 2.6 million bpd increase in global oil demand this year.
A high growth scenario, in which China’s GDP to rise 7%, would add another 400,000 bpd of demandaccording to the report.
However, the average price of Brent will remain this year below the average of 99 dollars per barrel registered in 2022as “markets have adapted to the chaos caused by Russia’s war with Ukraine,” according to the report.
“Everything points to the price of crude oil should rise”, explains Rafael Ojeda, Global Macro Analyst and Advisor at Fortage Funds SICAV. There is not a great possibility that OPEC will increase its production of oil, since they are not in the task of increasing their investment in oil infrastructure, since Western economies move towards decarbonization. If the price of crude oil gradually decreases in the coming years due to a drop in demand, they will not be able to amortize these investments. But, in the short term, not carrying out these investments to increase production will produce a bottleneck in the event that demand from China increases, so there will also be an increase in prices.
“We will see if it finally materializes, because the Western economies are very aware that an increase in the price of oil hurts inflation”, that is, there will be an increase in prices in general, something worrying in an environment of fight against the inflationary pressures.
But the expert believes that prices will increase when Chinese demand increases. Keep in mind that, so far, China is buying cheaper Russian oil. But there will come a point where that crude is not enough and it has to resort to other markets, which will push prices up.
This is how Brent has moved in recent years:
And it is that, barring a significant recession, Wood Mackenzie expects Brent to rise from current levels of around 75 dollars per barrel at an average of $89.40 per barrel this year. The scenario of higher GDP growth in China would add up to 5 dollars per barrel.
According to WoodMac, global refining margins will fall to about $6 a barrel in the fourth quarter from $11 a year earlier, as global refining capacity expansion outpaces growth in demand for transportation fuels. .
According to the report, the scenario of higher GDP growth would reduce Chinese gasoline and diesel exports as domestic consumption increases, supporting global refining margins by another 50 cents per barrel in the fourth quarter.
The big oil companies, fired on the stock market
It is enough to look at the behavior that the big oil companies are having on the stock market as well as the perspectives that analysts have about them to see that everything points to a rise in prices. Within the S&P 500, over the last 3 years, Devon Energy accumulates increases of 690%, Apa Corp of 627% and Marathon Oil of 550%. others like Marathon PetroleumOccidental Petroleum and halliburton They add up to around 400%.
Despite the strong rises, the analyst consensus reported by Reuters still gives Devon Energy and Apa Corp potential at 40%. They give even more potential to Marathon Oil, 45%, although the clear leader in terms of analyst optimism is Halliburton, for which they foresee increases of 61%.
Behind would be Occidental Petroleum, with a potential of 20%, and Marathon Petroleum, for which they expect increases of 18%.
