The oil price has seen colossal price swings in the past two and half years. At the lockdowns were introduced in 2020 as a reaction to the pandemic, the oil market tumbled as demand fears accelerated. In February 2020, WTI was trading in the region of $45 and by late April oil futures traded below zero as dealers rushed to exit the market. Actions have consequences, and OPEC+ decided to slash production by 10 million barrels per day as way of shoring up the price. By June 2020, oil has back up to $40 and when it because apparent the global economy was slowing reopening, and that policymakers were doing everything they could to support their respective economies, that lifted the oil market. In November 2020, Moderna announced a major breakthrough in its development of its vaccine and that boosted sentiment across the markets as a whole, and in turn, Oil traded above $50 – a level last seen before the pandemic.
Oil continued to drive higher throughout 2021 amid the optimism the world economy was bouncing back because pent up demand was being unleashed. Keep in mind, that global economy markets peaked in December 2021 – and that speaks to the bullish mood. In late 2021 and early 2022, inflation fears started to take hold, which sparked chatter about the prospect of interest rate hikes. That weighed on stocks, but oil kept rising because the high oil price was a factor in rising inflation and there were fears that if manufacturers did not snap up oil, it would be even more expensive to buy in the months ahead. Even though OPEC+ were lifting output as a way of undoing the huge production cut announced 2020, the rate at which was oil was being returned to the market was relatively slow, hence why the price continue to rally even though output was being lifted. Russia’s invasion ok Ukraine drove WTI beyond the $120 mark – its highest since 2008. Oil remained extremely volatile in the weeks and months that followed the invasion, but since June it has been in decline as worries about the health of the global economy are starting to chip away at oil.
In recent weeks, the mood in the markets has soured. Worries about slowing demand, very high levels of inflation and rising interest rate have hit the commodities market. In July, copper fell to a 20-month low, and in August dropped to its lowest mark in over two years – this could be a sign that demand traders are factoring in weaker demand in the month ahead. Earlier this month, WTI fell to an eight month low, but keep in mind that supply is being squeezed by the major oil producers. OPEC+ said announced that from October, production will be cut by 100,000 barrels per day. To cut output at a time when it appears the global economy is moving down a gear, highlights the willingness to keep oil at an elevated level.