Hillcrest Energy Technologies. (CSE: HEAT)
From concept to commercialization, Hillcrest is investing in the development of energy solutions that will power a more sustainable and electrified future.
Last week, driven by a combination of fundamental factors and geopolitical influences, an increasing number of market participants turned bullish, entering the long side of the crude oil market with growing optimism. As a result, the oil prices successfully broke through the $90 per barrel mark. Earlier this month, Brent crude futures first surged past $85 per barrel and then clinched the $90 milestone.
The current upward trend in the oil market is supported by a broader foundation, with global supply disruptions exacerbating concerns about a resurgence of commodity-driven inflation. There is a growing recognition of the significant correlation between energy commodities and inflation rates. Amid the backdrop of inflation expectations, investors are favoring crude oil as an inflation hedge, stripping the bears of their persistence.
The substantial shift in the fundamentals of the oil market has started to attract cautious funds, with the financial markets now convinced that oil is a buy. Exchange data indicates that in the week ending April 2nd, hedge funds and other asset management firms have increased their net long positions in crude oil futures and options. The combined net long positions for Brent and WTI crude have risen to a six-month high, with Brent’s net long positions reaching the highest level in two and a half years.
Should OPEC+ extend production cuts into the second half of the year, combined with robust oil demand, the oil price could surge to $100. In the midst of supply constraints, demand is on the rise. U.S. refiners are gearing up to ramp up fuel production in the summer, when millions of Americans will hit the roads, driving gasoline consumption to peak levels. Manufacturing activities in the U.S. and China also indicate an increase in fuel usage.
Regarding demand, Mike Muller, Head of Asia at the world’s largest independent oil trader, Vitol, expects global oil product demand in the second half of the year to be “significantly higher” compared to the same period last year, reaching approximately 2 million barrels per day. In Muller’s view, not only is there no talk of peak oil production, but the oil market will also experience a year-on-year growth rate unseen in the past 20 years.
Of course, OPEC+ and Saudi Arabia have the ability to change the supply dynamics, and surpassing the $90 mark may begin to erode demand, but there are no signs of this happening at the moment.
In addition, there is another geopolitical factor related to OPEC+ production cuts that should not be easily overlooked. Christof Rühl, Senior Research Scholar at the Center on Global Energy Policy at Columbia University, points out that both Russia and Saudi Arabia have the ability to drive up U.S. gasoline prices before the U.S. presidential election. This is not a conspiracy theory, at least for Russia, it is a desire to see Trump win the election and push up oil prices.
Bob McNally, founder of the consulting firm Rapidan Energy and a former White House advisor, stated that the current fundamentals of the oil market strongly support an increase in oil prices, and that as long as real geopolitical risks are more accurately reflected in the prices, oil prices could easily rise to $100.
