Global | From short-term chaos to long-term uncertainty

Summary

Commodity prices are front and center in global economic discussions. The last two months have seen the cost of oil rise by around 10%, alongside significant volatility. This has a lot to do with the short-term chaos.

Key points

• Key points:
• Several factors that have put pressure on the market in order for this situation to arise: OPEC+ asserted its commitment to maintaining production cuts at least until June, Russia saw its refining infrastructure attacked by drones, China reduced its oil imports in the first quarter and the U.S. economy is showing unexpected resilience.
• But perhaps most pertinent issue of all is the escalation of conflict in the Middle East, with Israel's attacks in Syria and both Iran and Israel retaliating in recent weeks.
• However, this time around, the short-term chaos is intertwined with long-term uncertainty. The global initiatives (albeit not very concrete) to reduce dependence on fossil fuels are clashing with the inability to scale the deployment of renewable capacities at the desired pace.
• Thus, the short-term chaos will keep prices volatile (analysts' forecasts range over $40 per barrel by the end of the year), but perhaps with a hint of bullishness compared to previous forecasts.

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