In the short run, trends in the oil market may be favoring large producers like Saudi Arabia and Russia.
The pandemic has worked out far better for the group of oil producers known as OPEC Plus than might have been expected a year ago. After a self-destructive price war, and a brief episode when some oil prices fell below zero, Saudi Arabia, Russia and their allies have emerged in a position that may be stronger than when the lockdowns began. Prices have been gliding higher since November, up 85 percent to about $75 a barrel for Brent crude, as global economies begin to consume more oil while OPEC Plus keeps a tight leash on output. As the oil producers prepare for their monthly meeting on Thursday, there is growing talk that the price could eventually hit $100 for the first time since 2014. The Organization of the Petroleum Exporting Countries and its allies are holding some high cards at the moment. More and possibly explosive growth in demand is expected in the coming months as economies recover from the coronavirus pandemic. Crude oil production in the United States, a nemesis for OPEC in recent years, has been slow to recover from a precipitous drop in 2020 as investors in producers lean on the management to restrain spending. “If I was an OPEC Plus producer, I would feel pretty comfortable with the way things are,” said Neil Atkinson, an independent oil analyst. These relatively short-term trends are occurring amid a broader shift for oil markets, as concerns over climate change lead to actions that will ultimately reduce fossil fuel consumption. While these concerns weigh on the oil industry’s future, some analysts say they may contribute to further price rises over the next couple of years. “The last oil price boom may be in sight,” said analysts from the Boston Consulting Group, a business advisory firm, in a recent paper. According to such thinking, enormous stimulus programs in the United States and Europe will spur record growth in economies, leading oil consumption to soar, perhaps above prepandemic levels. At the same time, oil supplies will struggle to keep pace, for a number of reasons. Oil companies reacted to the steep drop in prices and demand in 2020 by slashing investment in drilling for oil and gas.
