(OP)inions Demand for oil at risk

March 11, 2022 

Oils rapid price rise slowed after U.S. inflationrose to a fresh 40-year high, sparking worries that surging prices could hasten the onset of demand destruction.  

Oil futures in New York settled 2.5% lower, after trading in a $9 range on Thursday. With few new developments from either OPEC+ or the war between Russia and Ukraine, broader market moves came to the forefront, with oil tracking its typical inverse relationship to the dollar. As the dollar rises, commodities priced in the currency become cheaper. On Thursday, the foreign ministersof Russia and Ukraine met in Turkey but the meeting failed to yield any results.  

Oil is starting to edge lower as investors become concerned that stagflation risks could deliver a big hit to the short-term crude demand outlook. Everything is getting more expensive and the war in Ukraine will likely keep this upward trajectory in prices well into the summer, which could lead to crude demand destruction. 

The pause might only be temporary though as many analysts are still predicting rises up to $200 a barrel.  

OnePro Special Analyst

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