It’s beginning to look like oil is less and less a critical commodity.
Brent spiked by 30% from around $100 a barrel when Russia invaded Ukraine (February 24, 2022) and became even more volatile than usual, but by August it had subsided to below $100, and has continued to fall since then. Indeed, even the Hamas attack on Israel (October 7, 2023), with many pundits expecting a much wider escalation in the Middle East, has not had any material impact—oil rose by less than 0.5% the day following the attack and, again, has fallen since then and currently trading at under $78 a barrel.
I would point out that Brent has averaged around $68 a barrel since 2014, tracing a huge range between $16 and $131 a barrel. Clearly, we are currently about $10 higher than the 10-year average so it would prima facie suggest that there is more of a chance for the price to fall than to rise.
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While this is all to the good, certainly for India, we also know that there are no certainties in markets. Indeed, one somewhat threatening note is that the volatility of oil has climbed sharply from around 25% in September 2023 (just before the Hamas attack) to nearly 35% today. To be sure, these are still low levels—oil volatility averaged around 40% over the past 10 years, and, indeed, was as high as 60% right after the Ukraine invasion.
It does seem remarkable that despite the widening of the conflict across several hotspots in the Middle East oil remains so becalmed. Perhaps the market has come to the realisation that the global push into renewable energy is much stronger than it was even 10 years ago, and the surge in electric vehicles, particularly in the developed countries, is even greater than was expected as recently as 5 years back. This may explain why the overall supply/demand picture may be skewed in the direction of lower—and falling—demand.
So what if the average value of Brent over the next 10 years is, say, $58—i.e., $10 below the previous 10-year average?
What would it do to India’s current account? What would it do to Russia? What would it mean for global interest rates?
Stay tuned.
Jamal Mecklai, CEO, Mecklai Financialwww.mecklai.com. Views are personal.
It’s beginning to look like oil is less and less a critical commodity.
Brent spiked by 30% from around $100 a barrel when Russia invaded Ukraine (February 24, 2022) and became even more volatile than usual, but by August it had subsided to below $100, and has continued to fall since then. Indeed, even the Hamas attack on Israel (October 7, 2023), with many pundits expecting a much wider escalation in the Middle East, has not had any material impact—oil rose by less than 0.5% the day following the attack and, again, has fallen since then and currently trading at under $78 a barrel.
I would point out that Brent has averaged around $68 a barrel since 2014, tracing a huge range between $16 and $131 a barrel. Clearly, we are currently about $10 higher than the 10-year average so it would prima facie suggest that there is more of a chance for the price to fall than to rise.
While this is all to the good, certainly for India, we also know that there are no certainties in markets. Indeed, one somewhat threatening note is that the volatility of oil has climbed sharply from around 25% in September 2023 (just before the Hamas attack) to nearly 35% today. To be sure, these are still low levels—oil volatility averaged around 40% over the past 10 years, and, indeed, was as high as 60% right after the Ukraine invasion.
It does seem remarkable that despite the widening of the conflict across several hotspots in the Middle East oil remains so becalmed. Perhaps the market has come to the realisation that the global push into renewable energy is much stronger than it was even 10 years ago, and the surge in electric vehicles, particularly in the developed countries, is even greater than was expected as recently as 5 years back. This may explain why the overall supply/demand picture may be skewed in the direction of lower—and falling—demand.
So what if the average value of Brent over the next 10 years is, say, $58—i.e., $10 below the previous 10-year average?
What would it do to India’s current account? What would it do to Russia? What would it mean for global interest rates?
Stay tuned.
Jamal Mecklai, CEO, Mecklai Financialwww.mecklai.com. Views are personal.
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What is happening to oil? Oil remaining calm despite conflict in West Asia perhaps indicates that market has realised that global push to renewables is much stronger now
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12.01.2024
It’s beginning to look like oil is less and less a critical commodity.
Brent spiked by 30% from around $100 a barrel when Russia invaded Ukraine (February 24, 2022) and became even more volatile than usual, but by August it had subsided to below $100, and has continued to fall since then. Indeed, even the Hamas attack on Israel (October 7, 2023), with many pundits expecting a much wider escalation in the Middle East, has not had any material impact—oil rose by less than 0.5% the day following the attack and, again, has fallen since then and currently trading at under $78 a barrel.
I would point out that Brent has averaged around $68 a barrel since 2014, tracing a huge range between $16 and $131 a barrel. Clearly, we are currently about $10 higher than the 10-year average so it would prima facie suggest that there is more of a chance for the price to fall than to rise.
Also Read Broken trust at 30,000 feet: The impact of the Go First-P&W case has ramifications for international business Logistics Performance Index: The state of logistics India’s poverty riddle: Despite impressive growth, poverty fell just 0.3% per annum Lessons from the Maldives fiasco: India-Maldives relations under strain after PM Modi’s........
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