Investing.com – Geopolitical noise, fears of escalating tensions in the Middle East and supply risks remain on investors’ radar when it comes to the market. However, the commodity’s resilience to supply shocks may be underestimated. During these periods, the risk premium is higher, but temporarily, due to uncertainty about possible supply problems in the region, a major global producer.
According to Julius Baer, the perception of greater dependence could be “outdated” as this market has become more resilient to supply shocks for several reasons, Norbert Rücker, head of economics and next-generation research at the Swiss group, outlined in a note. released to customers and the market on Tuesday. Julius Baer sees prices falling below $80 per barrel due to ample supply and cooling sentiment, along with controlled production costs.
The ample available production capacity is one of the reasons Julius Baer cites. Amid production cuts by Middle Eastern players to artificially maintain prices, the market has a ‘decent cushion’. The expert points out that the available capacity is approximately 5% of the total oil supply.
More opportunities in the producer market also mean greater resilience, with the United States being a major exporter, and expansion in Brazil and Guyana more than offsetting the decline in Venezuelan production. In addition to these countries, the Canadian pipeline is expected to strengthen this market.
Chinese investments in oil infrastructure, which are expanding storage capacity to a level higher than that of Europe and refining capacity greater than that of America, also provide greater comfort against shocks.
Oil stocks are broader given declining demand in Europe and developed Asia, as well as stagnation in North America. “These storage levels seem even more comfortable from a relative perspective,” Julius Baer emphasizes.
Moreover, the development of an alternative market accelerated due to Western sanctions against Russia. “Russia, Iran and Venezuela will always find willing buyers for their oil, depending on the discounts they offer,” Rücker added in the note.
On Tuesday afternoon, WTI Futures rose 3.15% to $80.17, and Futures were up 1.65% to $84.25.
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