This study provides a projection for average crude oil pricing during 2022, utilizing predictive analysis methods correlated with fundamental analysis. The year 2021 was a bullish year in the oil market, reaching a multi-year record towards the end of the year. During 2021, Brent oil traded at an average pricing of 70.86 USD per Brent oil barrel and vast range of 54.77-83.54 USD on monthly basis. Evidently, predictive analysis provides a statistical probability range with a fair rate of accuracy. Find out more with the premium access option, which also provides the monthly Brent oil price forecast for the upcoming 12 months.
The conventional crude oil sector is an enormous market, with a daily turnover of over 5 billion US Dollars, not including investments and indirect expenses and excluding non-conventional liquid resources. Annual crude oil sales revenue was around 2.0 trillion US Dollars throughout 2021, which is nearly 2.4% of global GDP; whereas combined primary liquid fuels sales are estimated at about 2.5 trillion US Dollars. Despite decreasing importance of conventional crude oil, it is still making up a lion share of the global energy market. Conventional crude oil supply is at the level of 79 million bpd, which is about 81% out of total 97 million bpd of primary liquid fuels (2021), as liquid fuels compose some 30% of the primary energy market. Thus, conventional crude oil has significantly dropped from its peak primary energy market share of 50% in the 1970s, but is still critical for global economy. Conventional crude oil is primarily important for the transportation sector, though there is a wide use of oil products for backup power, industrial heating and for electricity production in non-OECD countries. Conventional crude oil is also widely utilized as a source for oils and polymers in the plastics and cosmetics industries.
The year 2021 was a bullish year in the oil market, reaching a multi-year record towards the end of the year. During 2021, Brent oil traded at an average pricing of 70.86 USD per Brent oil barrel and vast range of 54.77-83.54 USD on monthly basis. With global oil supply and demand closely corresponding, a further instability in global economy may set massive price moves in both directions. The importance of production stability is highlighted upon the growing geopolitical tensions in the Persian Gulf, while the supply side is greatly affected by the COVID19 crisis.
This study aims to provide a projection for average crude oil pricing during 2021, utilizing predictive analysis methods correlated with fundamental analysis. The herewith described price projection is based on the mathematical extrapolation model, which is derived from 15-year long and 10-year long Brent basket oil price trends. It is of course an assumption that polynomial trend extrapolation of first, second, third and fourth degree is sufficiently accurate to predict oil pricing in the short term of a single year. Such a model can be defined as "non-linear predictive analysis", and in case the assumption is correct - it allows us to provide reasonable projections for a limited time range. This is not a perfect method for financial predictions and is in fact rarely utilized by economists, but is much more objective compared with fundamental analysis and is certainly much more reliable than a simple "business-as-usual" scenario (zero or first degree polynomial fit), which is the dominant, but mostly imprecise, tool in many economic models.
Figure 1. Annual average OPEC basket oil price during 2006-2021, with mathematical predictive analysis of first polynomial, second polynomial and third polynomial fits to the 15-year price trend of oil.
In regard to the previous forecast for 2021 Brent oil price based on LNRG methodology, the result of 70.86 USD/barrel exceeded the forecasted range of 40-55 USD/barrel. Using the above conclusions, a better model was applied for forecasting an average annual Brent oil price data series, in order to produce projections for average oil price in 2022. As a result, we expect an average Brent oil pricing in the range of 41-79 USD/barrel with a mean of 62 USD/barrel during 2022.
Evidently, predictive analysis cannot provide accurate answers, since it is rather providing a statistical probability, but we can define a high probability range with fair accuracy.
The above presented data is a general informative survey and is not to be considered as a consulting in any way in relevance to capital investment, securities or any other financial instrument. For the avoidance of doubt, the author of this survey is not a certified investment consultant and hence the content of this document is not inclining the readers towards any financial action. It should be emphasized that the reader is recommended to check and verify the content of the above survey prior to obtaining any conclusions of it, since misunderstanding of written material might occur and that there could be unintentional data errors and resulting errors in the analysis. The content of this survey, including every part of it, as well as charts and analyses, are protected by the 2007 Copyright Act of the State of Israel and are not to be used in any way without the explicit approval of LNRG Technology. Charts and images from external sources are utilized in the survey with appropriate licenses; any use of such external charts and images by reader is under the direct responsibility of the reader and under the explicit conditions of the relevant author.
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