Petroleum is one of the most critical commodities that exists today. It’s the basis for several of society’s industrial activities due to its refining capacity, and is used mainly in the form of automotive fuel, such as gasoline and diesel.

To grasp the importance of oil for the world economy, we must remember that it’s a non-renewable natural resource, and found only in some global regions. This is because it’s composed of carbon and hydrogen molecules derived from organic materials accumulated below the planet’s surface, and only under specific conditions of isolation and pressure.

In addition to these factors, its extraction is a complex procedure, carried out by platforms that allow drilling into the soil (or under water) to extract the oil necessary for the transport and energy sector activities. It’s also widely used as a raw material in the manufacture of plastics, paints, synthetic rubbers, and other products.

Due to its importance in terms of energy supplies, oil is geopolitically strategic. In general, we can say that the market’s most active countries for this commodity are those that have large reserves of the material in their territories, as well as those that are major consumers.

Currently, the United States occupies the top position as the world’s largest oil producer. The BP Statistical Review of World Energy considers petroleum to include oil + some gases. In terms of oil alone, the U.S. produces close to 12.2M BPD. Even on an oil-only basis, it remains the biggest producer, according to 2021 data. The daily oil consumption by the U.S. is 14.9M BPD, and of its derivatives, almost 20M BPD.

In second place are Saudi Arabia and Russia with a combined production of 10.9 million barrels per day. China appears in the ranking’s sixth position with 3.9 million. Brazil ranks ninth on that list, with 2.9 million barrels of oil produced daily, according to the BP Statistical Review of World Energy’s 2021 figures.

Panorama of the 2022 Petroleum Market

The year of 2022 was marked by high volatility in commodity markets, and oil wasn’t left out of this scenario. During this period, supply restrictions and a looming slowdown in the West moved prices and negotiations.

Oil prices were supported by a low global supply. Also, higher demand resumed following the end of measures to restrict social mobility in most countries after the most critical phase of the COVID-19 health crisis had passed.

We even observed the price of a barrel trading at US$140, influenced by the uncertainties that the war between Russia and Ukraine generated in the market from February on. In fact, this continued conflict played a fundamental role in the events of the year in general.

According to the evaluation of Heitor Paiva, one of hEDGEpoint’s energy market experts, in this context of war, companies that held oil supplies (mainly Petrobras and other smaller ones) had positive gains, along with high dividends, that encouraged the industry. On the other hand, the conflict also gave rise to domestic inflation.

In the final months of 2022, the price of a barrel of oil dropped to US$80, as central banks in developed countries tightened their grips, especially the U.S. Federal Reserve (the Fed).

What are the perspectives for petroleum in 2023?

The reopening of China is certainly the most vital factor for this market at the moment, in Heitor’s words. Its economy should return to normal in the second quarter of 2023.

The market is extremely optimistic, especially in relation to demand, which will surely increase. In addition, the demand for derivatives and natural gas may increase as well. It’s woth remembering that the price of oil was already high at the beginning of this year.

Another expectation (and a simultaneous fear) is that there could be a global recession. The rise in interest rates imposed by central banks has made traders and market participants expect a retraction in the consumption of oil and derivatives.

The war between Russia and Ukraine could still demonstrate unexpected developments and thus impact the energy market. Therefore, it’s a key agenda to follow in 2023.

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How do you protect yourself in the petroleum market?

In the middle of so many variations in the oil market, derived directly from geopolitical and macroeconomic factors, it’s essential to have plans that offer more predictability and security for the future of your business.

To use a hedging strategy is the best option for anyone working in the commodity chain. This hEDGEpoint specialty acts as a kind of insurance against market price volatility, reducing transaction risks.

hEDGEpoint brings together the knowledge of specialists with risk management solutions through technology, and personalized consulting, to always offer you the best experience in futures operations.

Get in touch with one of our consultants at your convenience to learn more about how to use this instrument to favor your business.

Talk with a hEDGEpoint specialist today.