Oil keeps momentum on strong demand recovery
Oil is clearly in increasing demand and the market is becoming more and more bullish that the full recovery to pre-COVID levels is coming quicker than previously thought.
The demand recovery hype, which even led BofA to predict $100 Brent barrels for next year, is feeding oil prices today with some slim gains and is helping them overall to comfortably maintain their current levels above $70.
|
Advertisement: The National Gas Company of Trinidad and Tobago Limited (NGC) NGC’s HSSE strategy is reflective and supportive of the organisational vision to become a leader in the global energy business. |
The demand recovery is not only theoretical though as the effect from transportation’s fuel use is quite real and supported with real-time data.
Meanwhile, talks between the West and Iran to rebuild a nuclear deal that could bring back Iranian oil barrels to the global market are for the moment paused as a result of the Iranian election.
More Iranian oil would be a bearish factor in price shaping and as there is a current pause in negotiations, traders tick it off their worry list for the moment.
With demand growing, as long as US production doesn’t rise enough to fill the supply void, the momentum is poised to remain bullish for prices this summer.
In fact, with oil demand gulping ahead and with projections playing music to bullish ears, the perfect environment is being built for OPEC+ to come again as a ‘saviour’ for the market and increase production after July.
The next OPEC+ meeting is close and its members must be rubbing their hands on the prospect of agreeing to bring back more production in this price environment.
At this point it is good to remind that prices cannot be rising forever as they can have a reverse effect to demand. Extremely high prices may make the use of oil at certain industries, and transport, uneconomical.
For demand to continue to be there, supply has to follow to make sure prices are still affordable to support economic activity.
For the moment demand is back and is expected to be remain strong on the global enthusiasm that we are getting closer to the end of the pandemic, but at some point demand and supply have to balance to make sure the market doesn’t shoot itself in the foot.
The statements, opinions and data contained in the content published in Global Gas Perspectives are solely those of the individual authors and contributors and not of the publisher and the editor(s) of Natural Gas World.