Crude oil prices have not been this sanguine in a long time – it recently hovered the highest since 2018, which doesn’t come as a surprise as the world demand is all bright eyed and bushy tailed with inventories draining. It continues to recover and recuperate. Also, the recent Iranian elections brought the element of fear of stalled Iranian nuclear talks, which also pushed prices up. Oil prices have touched $75 per barrel. bbl. And oil demand that plunged 9.3 million barrels per day in 2020 is expected to recover by 6 million barrels per day in 2021. COVID-19 and the global oil price crash due to excess supply was a double whammy for the oil producers and exporters who are now seeing light at the end of the tunnel.
However, the rise has been rather gradual because despite recovering global economy and slowing down COVID-19 global cases as persistence of the pandemic as well as the chances of restoration of Iranian supply are casting a spell on the otherwise optimistic outlook.
All eyes are now on the upcoming meeting of OPEC and its allies as they are to decide the fate of oil supply. A boost to supply might be in the offing as the coming months point towards supply deficit with pent up demand. While the demand is likely to remain strong during the year as well as going forward, the group is likely to tread with overall tighter supply with the threat from Delta variant of COVID-19 as well as Iran’s crude flooding looming. This can be seen from the decline in price witnessed this week. With taps turned on, OPEC and its allies would like to keep its guarded. Since the collapse of demand last year, the group has gradually restored around 40 percent of cut production, which was close to 10 million barrels per day
Suffice to say that the journey to recovery will be a smooth one as the pandemic is still around, and the new Delta variant is much more dangerous than the previous variants. Also, the Iranian factor adds to the list of uncertainties.