Following a 50 per cent surge between January and early July as economies gradually reopened after the worst of Covid-19, oil prices have been fairly range-bound in recent months – notwithstanding a recent rally off their lows in the past few weeks as US production was hit when Hurricane Ida slammed the Gulf of Mexico.
Brent crude, the global benchmark, is currently around $73.50 (€62.25), off almost 5 per cent over the past two months or so.
However, oil traders and speculators were given reason for optimism on Monday when the Organisation for Petroleum Exporting Countries (Opec) said that the world’s thirst for black gold will breach pre-pandemic levels next year on the back of improving vaccination rates and increasing public confidence in governments’ management of Covid-19 spurring a recovery in travel.
Opec had previously forecast a return to 2019 demand levels of 100 million barrels a day in the second half of next year, but Monday's report was the first time the cartel said it is to rise to exceed pre-Covid-19 levels for the full year.
The report, which came as a surprise to many analysts, who had largely expected Opec to lower its 2022 demand estimates, underscores how oil continues to keep the world turning.
Investment in renewable energy is soaring and sales of electric cars rise at pace. But the problem for the environment – and global leaders preparing for the UN global climate summit COP26 in Glasgow in November – is ongoing growing demand for energy, especially in China and India.
While Bank of America analysts said in a note to clients on Monday that a new Covid-19 wave, concerns about central bank scaling back monetary stimulus too quickly, and a potential China debt crisis could all conspire to push oil prices lower, a cold spell in the Northern Hemisphere this winter could fuel demand and lift oil prices to $100 for the first time since 2014 by the year-end.
Good news for bullish oil speculators. But it will send shudders through households and businesses grappling with a general return of inflation.
