How can oil price volatility impact investments in the O&G

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What factors impact the price of oil? Every commodity has its price regulated by the law of supply and demand. Oil auctions are a perfect definition of this truth. However, as Fernanda begins by explaining, there is a particularity in the sector, mainly due to its importance. Not only markets, but governments also influence this value. Geopolitical forces can impact import and export agreements, coalitions, breakdowns in relationships and even wars — as has happened in the past. Therefore, anyone who deals with the sector needs a much broader view than just the current demand for the input. The professor gives an example of the power of international relations in this scenario: “At the meeting between OPEC — Organization of Petroleum Exporting Countries  and Russia, on March 6, what was expected was a consensus for a production cut that would drive prices up. But a decoupling of intentions led to a diametrically opposite direction, in which Saudi Arabia decided to flood the market with an even greater quantity of oil produced.

Prices reached something around 20 number database dollars a barrel, the lowest value in 18 years.” What have been the main fluctuations in recent years? It is clear that we are currently experiencing one of these major fluctuations for producers and the entire Oil & Gas chain. And, to get through it, it is important to understand the causes and effects of similar or more recent analogous moments. To do this, we asked the FGV Energia professor to name the most important ones in recent years. The so-called subprime crisis in the United States affected the entire market, including the oil market. This, however, is a time of recovery considered rapid. “A supercycle in the value of commodities caused oil to rise to more than US$100 per barrel, including the explosion in demand in emerging countries,” says the expert.



  What triggered the oscillation was the so-called Arab Spring, a series of revolts and civil wars that interrupted the flow of production in Libya. In this case, there was also a significant increase in prices due to the reduction in supply. More recently, the drastic drop in prices between and was motivated by the shale gas revolution in the USA. There was an explosion of supply in the market and expectations about the country's ability to realize this potential with investment in infrastructure — becoming an oil exporter, something unthinkable until recently. The year begins with a historic fluctuation and an unprecedented scenario for the O&G market. As we already mentioned, the price of a barrel reached very low prices due to a drop in demand that no company or country could prepare for.