Oil was going up because very little capital has been invested in the oil industry. After oil collapsed in 2020, it created one of the worst depressions the industry has ever seen. Shareholders told companies to stop drilling for oil. Companies that couldn't fund themselves outside of the capital markets went bust. Something like 75 firms filed for bankruptcy. Massive pools of capital in private equity simply went away because many investments went to zero. On top of that, OPEC is tapped out. OPEC can't turn on the taps. They are producing full out. The Ukraine war led to a spike, but prices quickly came down. Russia is still selling its oil but at deeply discounted prices to India and China. The fact that it is still getting into the market means that oil China and India would otherwise have purchased is being displaced.
When you stop investing in something, but demand keeps rising, then prices go up. That's true of anything. That's what has happened in energy. The ESG Disinvestment movement has been a negative, and Democrat's policies regarding no drilling on federal lands doesn't help, but it's really just capitalism working as it should.
The people selling oil futures are giant global macro hedge funds. They are swamping oil traders. If you talk to oil traders, they will tell you that absent a recession, you could see $200, $300 even $400 oil this year because the supply margins are so thin. But because investors are worried about a recession and demand abating, oil is selling off.
This supply/demand problem isn't going away anytime soon. We are simply not producing enough. I own a lot of oil stocks. I am thinking about adding if they continue to go down.
