Analysis: Imminent oil shock will hit the world

Despite recent increases in oil prices in world markets since the start of this year, it does not appear that the rally has come to an end as most observers expect the rise to continue and the world faces to imminent shock due to lack of supply, in return for increased demand for crude, according to the German news agency.
According to analysis by Energy Affairs Specialist Sharon Chu and Bloomberg News Economics Editor Skeet Sondria, the global oil market is heading for a supply shock, with global energy companies’ investment in production falling. of fossil fuels. projects and the growing trend towards clean energy. Some analysts also believe that global oil demand will not peak until the next decade.
Greg Hill, COO of Hess Corp., said during his participation in the Platts APEC 2021 forum in Singapore, that the total value of investments by international oil companies in exploration and extraction projects has fallen to around $ 300 billion. dollars, less than half of the total. annual investments before the outbreak of the pandemic.The novel Corona virus, which was $ 650 billion.
Energy companies are facing increasing calls from shareholders and governments to increase their spending on clean energy and focus on a future less dependent on fossil fuels.
For his part, Saad Rahim, chief economic analyst of the global commodities trading group “Trafigura Group”, said during his participation in the same forum which started yesterday in Singapore, that “the oil industry as a whole is caught between divergent investment imperatives. .. In the near future, global needs are expected to continue. For more than 90 million barrels per day, the question is: How to find the investments necessary to produce this quantity ”of crude.
Rahim added that the oil industry has suffered from a “structural lack of investment” and insufficient capital spending since the onset of the global financial crisis in the last quarter of 2008.
It is noteworthy that oil prices have increased by more than 50% during the current year, with the expansion of vaccination programs against the emerging “Corona” virus, which has enabled many countries around the world to ease movement restrictions that were previously imposed to prevent the spread of the virus.
At the same time, global crude oil and fuel inventories have fallen to pre-pandemic levels, bringing the benchmark Brent crude price for global markets to around $ 80 a barrel, despite the slowdown in activity. China’s economy and lower spending as a result of domestic restrictions.
For his part, Giovanni Sirio, head of the global market analysis department of Swedish energy group Vitol Group, said that the rise in international oil prices is mainly focused on spot contracts, while the final level of the curve futures price is still relatively low. .
This has led to a decrease in the flow of financial investments to long-term projects, also known as megaprojects, which involve the pumping of larger amounts of investment and risk with long-term returns. Meanwhile, US shale projects that could fall into the short-term category have been disciplined in oversupply despite rising prices.
Prices are expected to continue to rise given the inability of supplies to meet the rapidly increasing demand, according to Ben Lowcock, co-head of the oil trading sector at the Trafigura Group. The statements coincided with a report by the U.S. investment bank (Goldman Sachs Group) which expects Brent crude prices to hit $ 90 a barrel by the end of this year as the deficit in the Market supply relative to demand was higher than most analyzes indicated.
As for Ryan Fitzmauris, a commodities market expert at Rabobank, he says there is a good chance that oil prices will continue to rise in the coming weeks, with speculators buying to take advantage of the uptrend and not. not miss the opportunity to realize incredible returns on their investments.
Giovanni Sirio, who expects global oil demand to peak over the next decade, says the effects of lack of investment in oil exploration and extraction projects are expected to emerge soon, with increased energy consumption due to the effects of economic stimulus packages, easing monetary policy and lifting of restrictions on travel and travel.
Crude oil prices are also on the rise in light of indications of a sharp drop in global inventories, with increased demand ahead of the onset of winter, and the movement of the “OPEC Plus” grouping of oil-producing countries towards the country. ‘increase in their oil production.
Trafigura Group says that while traders anticipate a large deficit in the global oil market, longer-term contract prices are still cheap, hovering around $ 70 a barrel. At the same time, the so-called “difference” that measures market strength has risen sharply in recent weeks, which is further indication that the outlook for traders is positive.
Finally, Goldman Sachs analysts, including Damien Corvalin, say in a report to clients that the market deficit is unlikely to decrease in the coming months, as they believe it will be greater than the desire and capacity of countries to OPEC Plus. to fill it.