Oil prices are expected to average around $90 a barrel in the 2023-2027 period. These estimates appear to be a consensus among industry professionals, according to an annual survey conducted by Reuters. The current price, per barrel, right now is $4-10 above last year’s survey estimates.
“According to this year’s survey, prices are forecast to average $87 in 2023, down from $99 reached in 2022, when prices rose following the invasion of Russia and sanctions imposed in response by the United States and the European Union. .”
“Forecasts for 2023 are tightly packed, with half of respondents expecting the average price to be between $80 and $95, and more than 90% expecting the average to be between $70 and $105.”
Of course, these estimates are made with the information we have now. Of course, many things can go wrong along the way. The conflict in Ukraine, the reopening of China, the tension between the United States and China, the aftermath of the pandemic, and the economic slowdown are variables that increase uncertainty. Therefore, this supposed stability around $90 is obviously an assumption that is made betting on the absence of surprises.
And OPEC+? Well, Let’s hope OPEC+ doesn’t get too creative with big production cuts during 2023. The hope is that OPEC+ will ditch their cut plans. It seems that world demand for oil will increase by 2.7 million barrels per day in 2023 and the market will again be in deficit in the second half of the year. According to Goldman Sachs, this should cause the OPEC+ alliance to remove its production cut in the second half of the year, indicates a note from World Energy Trade.
The price of oil is highly relevant in the fight against inflation. Ideally, the price would fall due to a significant increase in production. However, the scenario of (relative) stability around $90 is the second best scenario. In this sense, what we least want is a barrel well above $100.
The price of oil is closely linked to inflation. Inflation is related to monetary policy. And monetary policy is highly tied to valuations of financial assets like stocks and crypto. This interconnection must be taken into account when making our forecasts.
However, every investor should start with an assessment and an expectation. After all, the investor grows from that difference in value between today and tomorrow. Buy “cheap” today to sell at a better price tomorrow. That is the importance of forecasts and estimates.
The problem in contexts of high uncertainty and high volatility is that the probability of forecast failure is higher. Therefore, the most sensible thing to do is to take a more conservative approach in relation to risk. You have to make assessments and forecasts. However, the necessary protective measures must be taken in case things do not turn out as anticipated. You always have to have a plan B. Or, put another way, you don’t have to count the chicks before they hatch.
In the crypto space, there is a tendency among retailers to underestimate the influence of macroeconomic factors on the price of Bitcoin. The scarcity of the code itself is thought to create its own demand. This scarcity adaptation is practically a fetish. Basically, it is an exaggeration of a valid idea. In the case of a finite code in a decentralized network of computersDemand is the most important. As simple as that.
How does this thing actually work? The buyer uses dollars to buy BTC. What is BTC? A code. This code represents a rate. And this rate is defined with supply and demand. The price. Now, the buyer measures his financial growth in dollars, because his expenses and debts are in dollars. What he is really looking for is to grow financially in dollars. Y buy this code called Bitcoin for the opportunity it represents.
In a more practical sense, this rate is simply a pair, the BTC/USD pair. Therefore, the monetary capacity (in dollars) of the buyer greatly influences the demand for BTC. Obviously, with little money in our pockets we can buy much less than with a lot of money in our pockets. In other words, in a low liquidity environment, demand cannot be the same as in a highly liquid environment. Like that or more clear?
It’s not that complicated. Let’s assume a household that has income X and expenses Y. If Y increases due to inflation combined with higher costs of credit, it doesn’t take a rocket scientist to know that the money available for “risky” investments will be less. . Another case. Most analysts forecast a recession for the second half of the year. And that could mean unemployment. Which becomes a stimulus to increase cash reserves. Most households create an emergency fund for lean times. Therefore, there is less money available for “risky” investments.
In this context, “demand” means willingness to spend dollars. And if there are few who want to spend their dollars, we hardly have a strong demand. The storm is navigated with stability. LScarcity does not help much, if that scarcity does not guarantee stability.
Unfortunately, the investor also has to eat every day. Each product is sold at a price. And that price is monetary value that is fixed in numbers. If the product costs $20, the exchange will be made with $20. That is to say, what gives us protection is the stability of the unit of account. The protection does not derive from the scarcity of its emission. Scarcity adoption definitely has its limits. The impact of scarcity is not so literal.
The storm is navigated by adding stability to our finances. Of course we can go buying little by little betting on the eventual recovery of prices. But putting all your eggs in one basket is not the wisest move. Above all, we must consider that this basket comes and goes like a roller coaster. I mean, our exposure to risk must be according to the circumstance. What happens if the Bitcoin price crashes to new lows? Do I have to pay all my debts? Can you cover all my expenses? How is my lifestyle affected? If the answer to this last question is “not at all”, it is very likely that you are doing things right.
Disclaimer: The information and/or opinions expressed in this article do not necessarily represent the views or editorial line of Cointelegraph. The information presented here should not be taken as financial advice or investment recommendation. All investment and commercial movement involve risks and it is the responsibility of each person to do their due research before making an investment decision.
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