Will the post-pandemic oil demand skyrocket?
The oil price is going up and investors seem to believe that it will continue on an upward trajectory.
The rising price movement is caused by expectations that global supplies will decrease due to a wide-scale vaccination induced pandemic recovery this summer, optimism emerging from price forecasts receiving upward revisions and a general market sentiment that’s bullish.
Will there be enough oil by the summer?
With demand expected to rise and supply expected to struggle to meet market requirements, markets can’t help but question whether there is enough oil to cover the summer peak demand season.
The U.S. polar blast halting crude production with an estimate of 40 million barrels not being produced due to the freeze, will further firm oil markets as global economies enter post-lockdown periods. At the same time, crude oil stored at sea retreated to an 11-month low last week, indicating that oil supplies are rapidly decreasing. Even though Saudi Arabia and Texas continue to produce oil, the fear that in 12 months there will be a global oil shortage is valid.
A pledge from Saudi Arabia to deepen production curbs in combination with positive vaccine developments caused the prices to go up and the global benchmark crude to gain over 25% this year. To further reinforce the bullish market sentiment, analysts expect oil prices to reach $75 and even $80 a barrel this year and the excessively loaded oil inventories around the globe to get fully drawn down during the summer.
Opposing views
Saudi Arabia and Russia are participating in an OPEC + meeting next week. They don’t seem to agree as to whether to fuel the market with more supply in April and that further adds to the uncertainty of the oil supply picture. Saudi Arabia seems to want to keep the oil output steady while Moscow wants to move forward by increasing the output.
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