SUMMARY

• The current oversupply in the global oil market, influenced by Saudi Arabia and Russia, is projected to swing towards an undersupply by the summer, potentially pushing up prices.
• Amid a recent dip in crude prices, the reopening of China's economy could trigger a surge in global oil demand.
• Despite a year-to-date slump, the S&P Energy Select Sector (XLE) may bounce back as rising oil prices are set to energize the sector.

Just like the heat of the Arabian desert and the chill of the Siberian tundra, the global oil market is no stranger to extremes. This time, the spotlight is on two of the heavyweight champions of the oil world - Saudi Arabia and Russia. As the story goes, there's currently a little extra black gold than we need floating around, but a seismic shift is on the horizon. By the time we're swapping spring blossoms for summer sunsets, we might find ourselves scraping the bottom of the barrel.

So, what happens when the oil well runs dry? If you've ever been the last one to the buffet and found the shrimp platter empty, you'll know the feeling. Prices tend to get a little frisky. According to our industry insiders, we're likely to see oil prices deciding to take the express elevator up.

Despite the recent decision by OPEC+ (with Saudi Arabia and Russia at the helm) to dial back production, crude prices have been a little under the weather. After an initial round of high-fives, both West Texas Intermediate (WTI) and Brent have dropped their party hats. As of last Friday, WTI was lounging at $70.04 per barrel and Brent was hanging out at $74.17.

Meanwhile, as China starts to break free from its Covid-19 chains, the demand for oil is expected to skyrocket. With the world's eyes fixed on China's grand reopening, there's a sense of anticipation in the air. Will the rising demand for oil in China give the market the adrenaline rush it needs?

Finally, if you've been eyeing the stock market, now might be a good time to bet on energy. The S&P Energy Select Sector (XLE) might be down 10% year-to-date, but the forecasted climb in oil prices could be just the trampoline energy stocks need.

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