The global oil market is expected to shift from oversupply to undersupply in the coming months, according to market strategists.
This prediction comes after months of volatility and uncertainty caused by the COVID-19 pandemic and geopolitical tensions.
The demand for oil is rapidly recovering from the slump experienced during the peak of the pandemic in 2020, as economies around the world reopen and resume normal operations.
Simultaneously, production cuts by major oil producers, including OPEC+ and the United States, have helped to reduce the global oversupply of oil.
In March 2020, the global oil market experienced a significant oversupply, with Brent crude oil prices plummeting to a 21-year low of $20 per barrel.
However, as of May 2023, Brent crude oil prices are trading at over $70 per barrel, driven by a combination of factors including rising demand, production cuts, and geopolitical tensions.
According to market experts, the shift to an undersupply in the oil market is likely to occur in the coming months due to several reasons.
First, the ongoing production cuts by OPEC+ and the United States are expected to continue, resulting in a decrease in the global supply of oil. Second, the increasing demand for oil is expected to outstrip supply, resulting in a shortfall.
Furthermore, the demand for oil is expected to rise further as countries resume international travel, and industries such as aviation and tourism recover.
The International Energy Agency (IEA) recently revised its global oil demand growth forecast for 2023 upwards to 1.5 million barrels per day, up from its previous estimate of 1.3 million barrels per day.
The shift to undersupply is expected to have significant implications for the global economy.
Higher oil prices will increase input costs for businesses, leading to higher inflation and potentially slower economic growth.
Furthermore, undersupply may lead to increased geopolitical tensions as countries compete for access to limited oil supplies.
In conclusion, the global oil market is expected to shift from oversupply to undersupply in the coming months due to a combination of factors, including increasing demand and ongoing production cuts. This shift is expected to have significant implications for the global economy and underscores the importance of sustainable energy practices to reduce reliance on fossil fuels.