Soaring interest rates are transforming the oil market

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Soaring interest rates are transforming the oil market as traders looks to sell down inventories to cut costs while hoping demand grows. Read on.

“Nobody wants to hold inventory, and I think we are, as a world, going toward lower inventory forward cover,” Amrita Sen, co-founder and director of research at Energy Aspects Ltd. said in a Bloomberg TV interview in June. “If you ask me what did I miss this year, it has been the rising cost of capital and what that’s doing to the market, which is destocking.”Take a two-million-barrel cargo with prices at, say, US$80 a barrel.

It all serves to increase the chances of the world having to get used to lower levels of oil inventories. The International Energy Agency forecasts a demand for OPEC crude and inventories of more than 30 million barrels a day over the second half of the year.

 

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