Asset Class in Spotlight: Crude Oil
- The price of crude has increased +21% so far in 2022 to $91/barrel as the oil companies have slowed their investment in exploration & drilling in favor of green initiatives while demand has returned to pre-covid levels.
- Rather than develop oil reserves which takes 5 – 10 years & billions of dollars of investments, companies are choosing to return cash to their investors with dividends and stock buybacks
- Notice first that during 2020 the consumption of gas severely dropped-off because of the lockdowns.
- In turn, the production of oil also followed demand lower and production has remained at this lower level even as demand has rebounded to pre–covid levels.
- As OPEC+ is not hitting their collective production metrics, the lack of spare barrels could drive the price well into the +$100/barrel range if any sort of setback or supply disruption takes place.