We see oil at the peak of its cycle, with prices operating in a bullish scenario, and we are confident that the rebound will be temporary
The oil market is showing strength. Prices have risen above $ 85 a barrel, which has contributed to the inflation debate. However, it is difficult to pin down where this strength fundamentally comes from.
The rebound appears to have become the latest episode in the energy crisis saga, with bullish sentiment spreading from the coal and natural gas markets. There is narrative and anecdotal evidence of increased use of oil in power plants in response to spikes in energy prices. With the exception of the Middle East, oil-fired power plants have largely disappeared in recent decades and the use of diesel generators remains a temporary phenomenon, both for economic reasons. There is a high degree of uncertainty about what the potential impact might be.
Due to its temporary nature, the use of oil for electricity generation should have minimal relevance to overall oil demand. Importantly, there are countervailing forces at play. China's economic woes, related to the energy crisis and housing market stress, and high fuel prices in the United States are likely to affect demand.
