Predicting oil prices is a difficult job at the best of times. Still, it is increasingly difficult as COVID-19 and its variants continue to suspend consumers' plans and disrupt the balance between oil demand and supply.
Energy Sector Outperformed the Broader Market
Information is not investment advice
Bloomberg reported that ‘the S&P 500 Energy Index has outperformed the broader S&P 500 by 21 percentage points so far this year, with the top-performing stock, Devon Energy Corp., gaining a whopping 167%’.
Now, energy stocks have outperformed the broader market for the first time since 2016! Moreover, analysts believe that this trend will continue despite the global shift to renewable energy resources.
“There’s a massive appetite to invest in it because it’s just spewing out cash right now,” said Rafi Tahmazian, whose energy producer-focused fund is up 91.2% year to date.
What is the forecast for oil in 2022?
As usually, opinions are divided. Some experts predict that oil prices may experience a correction. WTI oil (XTI/USD) is expected to drop to $66 per barrel by the end of the first half of 2022 and $65 per barrel by the year-end. Still, Tahmazian claimed energy companies could continue to be profitable with lower oil prices.
However, the OPEC+ alliance has upgraded the global oil demand forecast for the first quarter of 2022. The OPEC members believe that the omicron impact will be mild and short-lived. Indeed, the outlook for more robust demand in combination with the current supply limits can keep oil prices afloat.
XBR/USD is moving inside the ascending channel. The key resistance level lies at $80.00. If crude oil manages to break above this level and close there, then oil has all chances to rally further to the October peak at $85.00. Support levels are at the intersection of the 50-week moving average and the lower trend line at $71.50 and $68.00.
Energy stocks to trade with FBS
Royal Dutch Shell #RDSB
Linde Plc #LIN
Anglo American Plc #AAL
Energy trading instruments in FBS
XTI/USD (WTI oil)
XBR/USD (Brent oil)
XNG/USD (Natural Gas)
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