Oil Demand vs Supply
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Oil Demand vs Supply

Since the beginning of the pandemic till this day, Oil price projections have been one of the most anticipated instruments in the financial markets.

 

Crude oil futures reached prices below 0 level for the first time in history in April 2020. After that crude oil prices started retracing to the upside as demand increased due to the initiation of the vaccination phase.

 

Logically, as demand (Figure 1) started to increase with businesses reopening and Covid restrictions easing in most countries, Oil prices were projected to start increasing.

 

Figure 1: Source TradingView WTI Crude Oil prices

 

Major global banks projected the crude oil prices to reach $100/Barrel within the year 2021, However, these projections were analyzed taking into consideration that OPEC+ might increase supply.

 

Yet to this day, the OPEC+ still didn’t issue a supply increase order to tackle the increases in Oil Prices. Due to the above reasons, the current Russian/Ukrainian War, and the U.S. administration banning Russian oil imports, crude Oil prices hiked further-reaching prices exceeding $126/Barrel.

 

However, after that, we witnessed sharp decreases in prices, backed by the release of the SPR by the Biden Administration, which pumped more Oil into the market, and also because negotiations between Russia and Ukraine started.

This drop was technically signaled by the Head and Shoulders formation which in this case in specific was successfully triggering the Crude Oil prices downwards (Figure 2).