Crude Oil Soars to Highest Since 2014 as OPEC Maintains Existing Output Increase
Crude prices soared to a 7-year high on Monday, after OPEC agreed to maintain a planned supply boost as demand for oil continues to increase around the globe.
US crude futures were up by more than 2% on Monday, after OPEC members agreed to keep the monthly output hike at 400,000 barrels per day. Back in July, the group’s ministers settled to gradually raise oil production through to April 2022, in an effort to eliminate a 5.8 million barrel per day worth of production cuts.
The crude oil market has become substantially more constrained since the Covid-19 economic recovery, particularly as adverse weather conditions in the US Gulf of Mexico unexpectedly disrupted supply. Moreover, skyrocketing natural gas prices across Europe and Asia have added to the surge in demand for crude oil products used in the generation of energy.
To make matters worse, the likelihood of a new global economic crisis will continue to grow, particularly as oil prices accelerate and inflationary pressure remains high. In a Bank of America note seen by Bloomberg, crude prices could $100 per barrel this winter, as skyrocketing natural gas prices will prompt a gas-to-oil switch, further fuelling crude demand. At the same time, the lifting of restrictions for international travel is also expected to boost the demand for oil.
“If all these factors come together, oil prices could spike and lead to a second round of inflationary pressures around the world,” the Bank of America warned. “Put differently, we may just be one storm away from the next macro hurricane.” The bank also highlighted that a lack of investment in commodities due to dismal returns will also send oil prices higher in the long-run.
Information for this briefing was found via OPEC and Bloomberg. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
