The global oil market may soon experience tighter supply levels, especially if OPEC and its allies are unable to set their differences aside and ramp up production levels.
According to the International Energy Agency (IEA), the global demand for oil is slated to undergo a significant rebound, especially as Covid-19 travel restrictions lift, vaccination rates rise, and economic growth rebounds. However, given the current standstill amongst OPEC+ members, the ongoing oil supply deficit may widen even more, resulting in elevated fuel prices. This in turn could send inflation levels surging, and further impede the delicate economic recovery.
OPEC+ has recently been embroiled in a dispute, as its two Middle Eastern members, the United Arab Emirates and Saudi Arabia, continue to argue about their production output quotas. The cartel was slated to agree on an output plan that would increase production, but talks were postponed due to a sudden disagreement. As a result, next month’s output levels will remain unchanged, despite the accelerating rebound in fuel consumption levels.
Brent crude prices are currently hovering at around $75 per barrel, close to the two-year high. Similarly, US benchmark West Texas Intermediate is averaging at approximately $74 per barrel.
Information for this briefing was found via the IEA. 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.
