Volatile oil prices expected to remain elevated – The Peninsula

Volatile oil prices expected to remain elevated – The Peninsula

Doha: Oil markets have been experiencing unprecedented bouts of volatility and dislocation since the pandemic started in early 2020. In fact, exogenous shocks to oil markets have been so large that prices followed extreme upward and downward swings in relatively short periods of time. This article aims to elaborate on those significant events since the pandemic and concludes with an outlook for oil prices in the near future.

At the start of the pandemic, a negative demand shock from large-scale global lockdowns amplified the effects of a supply glut that was accompanied by a “market share war” amongst oil exporters. This led to a market rout that was so severe that it caused a temporary collapse in market conditions, as inventories were above full capacity while at the same time transportation costs exploded. Brent crude, the most relevant benchmark for global oil trade, bottomed below the USD 20 per barrel mark in late April 2020.

From April 2020 to end of year 2021, crude oil prices experienced a remarkable turnaround. This was supported by a faster than expected post-pandemic global economic recovery and active output management by OPEC+ member countries, led by Saudi Arabia and Russia. An additional spike in oil prices