- WTI has fallen back to $ 75.50 and is currently trading just above the weekly lows set earlier in the session.
- Low liquidity and year-end profit taking have led to choppy trading conditions for oil prices on the last day of the year.
- Nonetheless, WTI is projected to post massive annual gains of over 55%.
WTI futures for the first month They fell to fresh week lows near $ 75.00 a barrel in recent trade amid what appears to be modest profit-taking on reduced holiday trading conditions in the final session of the year. Prices have since rallied to around $ 75.50, but the swing may continue in the US session amid expectations of a continued lack of liquidity.
The intraday volatility that has seen WTI drop around $ 1.0 in the session should not distract from the fact that oil prices will post their best annual performance since 2009. WTI is expected to post gains of more than 55% after having raised from lows last January below $ 50.00 per barrel. Crude oil has surged this year as the global economy has recovered from the 2020 pandemic-induced recession and has become more resilient over time to successive waves of the virus, largely thanks to rising rates. vaccination.
After rising to $ 85.00 in October (annual gains of almost 80% at the time), oil prices experienced a sharp downward correction in November and December for fear of economic disruption and destruction of demand. of crude oil after the emergence of the new highly transmissible Omicron variant of Covid-19. However, as evidence has accumulated in recent weeks that the new variant is much milder than any previous strain of the virus and the government has refrained from imposing lockdowns, risk appetite and crude oil prices. they have recovered drastically. Therefore, WTI is set to post a monthly gain of around $ 8.50 or nearly 13% and is up more than $ 12.50 or 20% above the previous monthly lows at $ 62.50.
But Omicron risks persist, with countries around the world (including the US, UK and Australia) reporting record daily infections and this is limiting oil profits. The fact that New Years celebrations have been canceled in many parts of the world is indicative of some of the short-term risks facing the global economy and could perhaps be behind some of Friday’s year-end gains. On the other hand, some investors fear that supply-side dynamics could affect oil prices in 2022 as OPEC + and US production rise.
These fears were reflected in a poll published by Reuters on Friday. The average forecast from survey participants was that WTI would average just over $ 71.00 over the course of 2022, a downward revision to expectations for oil prices next year from the November survey. In the previous survey, the median investor forecast had been that WTI would average just over $ 73.00 next year. Sources who spoke to Reuters earlier in the week said the cartel appears to be on track to agree to increase production by 400,000 barrels a day again in February. According to analysts at Julius Baer, ”With oil demand growth slowing, supply growth persisting, and the energy crisis easing, we see the oil market balance expanding rather than contracting. in 2022 and therefore we expect prices to trend down from current levels. “
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