Energy Geopolitics: Winning The Game in 2024
By John Persinos
"Please God, give me one more oil boom. I promise not to blow it next time."
That's the bumper sticker message I saw a few years back, when I was visiting Austin, Texas to attend a music festival. It made me laugh, but it also conveyed wisdom about this volatile sector.
The energy sector is known for its extreme boom-bust cycles. The S&P 500 energy sector fell 1.33% for the year ending December 2023. By comparison, the broader S&P 500 was up more than 26% for the year. The energy sector's narrowly negative performance in 2023 stood in sharp contrast to gains of 65.72% in 2022 and 54.64% in 2021.
All of which begs the question: How will the energy sector fare in 2024? Below, I delve into the factors that drove crude oil prices in 2023 and explore the potential path they may take in 2024. I'll also offer insights for energy investors to position their portfolios.
Crude oil prices are likely to stay elevated in the coming year, boosted by tight supply, worsening geopolitical risk, and accelerating global demand for energy. This confluence of factors will provide the context for profitable opportunities.
The year 2023 was marked by volatility in crude oil prices, driven by a myriad of factors ranging from geopolitical tensions to supply disruptions and demand fluctuations.
At the outset last year, the lingering effects of the COVID-19 pandemic continued to cast a shadow over global oil demand, as sporadic outbreaks and containment measures dampened economic activity in key consuming nations, notably China. The draconian "zero tolerance" COVID policies implemented by Beijing (now lifted) wreaked havoc with supply chains and energy demand.
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