This commodity offered the most opportunities for profit in 2022

The commodities market has been experiencing a renaissance of late, with some commodities even significantly outperforming equity indices. However, only one commodity has played a leading role in 2022. Traders who did their homework and followed the fundamentals had several opportunities to profit handsomely from their diligence. You will find out which commodity we have in mind in this article.

We won't keep you in suspense for long, the commodity we have in mind is oil, obviously. Choosing it as the most important commodity of 2022 was relatively easy, despite the wild events on the markets and in the world (or maybe because of it). After all, arguably no other commodity was so prevalent when it comes to newspaper headlines as oil was. So what was the currently ending year of 2022 like for oil and what were the biggest opportunities that could have brought significant gains for those who were prepared?

The beginning of 2022 - high demand on oil and what preceded it

Looking at the long-term price chart below, it is evident that oil was entering 2022 at long-term above-average levels. The price per barrel of around $70 was higher than we are used to for both US WTI and North Sea Brent. Especially if we look at the development since 2015. The more expensive oil was driven by a significant increase in demand caused by coronavirus. This caused the entire world to come to a virtual standstill in 2020, halting the demand for oil in the process. Many of you probably still remember the unprecedented plunge into negative numbers on WTI oil caused by this.

WTI crude oil on D1 chart in MT4 platform
WTI crude oil on D1 chart in MT4 platform

With the gradual relaxation of coronavirus restrictions, the hunger for travel gradually grew and oil demand with it. Its price thus gradually rose to long-term highs. However, there is another important factor to note here - in the period before the coronavirus, the oil sector had long been underinvested as Western economies were moving away from it towards renewable energy sources. As a result, the number of active oil rigs in the U.S. declined from approximately 1,600 to less than 200 between 2014 and 2020. The oil market was thus certainly not prepared for the huge shock that was soon to come in 2022.

Number of active oil rigs in the USA (Baker Hughes oil rig count), source: Investing
Number of active oil rigs in the USA (Baker Hughes oil rig count), source: Investing

February 2022: Russian aggressor enters the scene - oil price rises

The shock in question is of course the incursion of Russian troops into Ukraine, which shocked the world and its markets causing huge uncertainty due to Europe’s dependence on Russian oil and gas. It did not take long for Brent and WTI oil to react as soon after both these instruments had met their ATH levels from 2008. The high price of oil also made fuel significantly more expensive, which translated into a rise in inflation, which is still being experienced by virtually all countries.


Of course, this situation has not been bad for everyone - the OPEC cartel countries, for whom oil exports are a major source of revenue for their national budgets, have lined their pockets. And oil companies are not faring bad neither.

Summer 2022: Significant drop - oil under pressure again

Highly above-average oil prices remained on the market until June, but then began to fall quite significantly. There were several reasons for this - the number of active oil rigs in the US increased significantly to more than 600. US production was therefore back on track. In addition, the US President committed to releasing a record amount of oil reserves. As a result, 180 million barrels of oil were released onto the market.


Moreover, the equilibrium in the world of oil had gradually started to shift - although Russian oil was toxic for Western countries, countries such as China, India and Turkey were and are buying it cheerfully at a huge discount. Europe, which was highly dependent on Russian oil, had to find alternative sources of oil in the form of the USA, Norway and Arab countries, for example. Moreover, despite several problems with the operation of the Druzhba pipeline, Russia is still supplying some Central and Eastern European countries with its oil.

The main factors shaping the price of oil in 2022

Arguably the most important factors in the decline in oil prices have been the strengthening US dollar and the threat of a global recession. A strengthening US dollar generally depresses the price of commodities and therefore oil. The aggressive policy of the US central bank and the rapid increase in interest rates have made the US dollar more attractive. In addition, it is also seen as a traditional safe haven - i.e. a currency into which some entities transfer their funds in times of nervousness.

Brent crude oil on the D1 chart in MT4 platform
Brent crude oil on the D1 chart in MT4 platform

Another factor that pushed the oil price lower over the summer months was fear of the onset of a global recession. Some countries may already be in recession. However, a recession on a global scale would significantly reduce demand for oil and oil products. To illustrate, we can look at the great financial crisis of 2008, when oil prices fell from USD 140 to below USD 40 per barrel within a year. Thus, any news of higher-than-expected inflation in major economies increased the likelihood that we were indeed heading into a recession.


The cooling demand for oil is already evident in China, which is also still struggling with the coronavirus. China's ongoing battle with the coronavirus has been another factor that has pushed oil prices significantly lower. China is the world's largest oil importer and any negative news can shake oil prices significantly.

Autumn 2022: OPEC defends oil at all costs

The OPEC cartel plays a key role in the oil market. It and its affiliates control around 50% of world production and up to 90% of known reserves. Any cuts in production can send the price of oil higher. The OPEC cartel met in person in October for the first time since the coronavirus, so the market was obviously expecting big news. And big news certainly did come, OPEC+ members agreed to cut oil production by 2 million barrels a day, about 2% of global production. The market was therefore afraid of possible oil shortage during the winter months and the price of oil jumped again to USD 100 per barrel.


It did not take long, however, for all the newly gained oil prices to be wiped out under the threat of weak Chinese demand, leading oil to its lowest levels since the start of the year in early December. We were thus eagerly awaiting the next cartel meeting, with rumours of production cuts of another 2 million barrels per day again. However, OPEC caught the market by surprise and kept its production unchanged due to global demand uncertainty as well as the expected reduction in Russian oil exports. This is likely to come due to the capping of Russian oil at $60 per barrel that occurred in early December. Russian oil exports could thus fall by up to 1 million barrels per day.

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