What’s Going On Here?A bunch of the world’s biggest oil-producing nations met on Thursday as demand for the black stuff surges – but as Finimize goes to press, reports suggest they’re keeping a stopper on supply. What Does This Mean?2021 is turning into a vintage year for crude oil producers. As lockdowns ease and economies expand, they’ve been able to steadily increase output without undermining prices. But while pressure’s been growing on producers to turn on the taps, OPEC+ (a group of major oil-exporting nations and their allies that includes Saudi Arabia and Russia) reportedly plans to pump fewer than 500,000 extra barrels per day between now and Christmas. Investors in companies that buy a lot of oil were understandably disappointed, but investors in oil itself will be raising a glass: prices rose above $75 a barrel on Thursday for the first time since 2018. Why Should I Care?For you personally: Give me liberty – or give me gas.
You may get a shock when you fill up the car this Fourth of July weekend: a gallon of fuel in the US is now 20% more expensive than before the pandemic (tweet this). With investment bank Citigroup forecasting global oil demand will exceed supply by three million barrels per day this quarter – and hit a record high in August – don’t expect gas to get much cheaper anytime soon. Just as well the future of transportation is electric…
The bigger picture: Happy Interdependence Day.
High oil prices should lead to recent tensions between OPEC+ member states simmering down. When oil’s closer to $50 a barrel, nations like Russia that don’t need high prices to fund government spending remain keen to increase production – leading to run-ins with the Saudis. But if prices stick above $75, even the most heavily oil-dependent economy can balance its budgets. It may soon be in everyone’s interests to up pumping a little bit more. | 