Analysts debate the question. The global economy depends on the answer
. Crude prices, which exceeded $125 a barrel for much of June last year, languished below $85. To arrest the slide, which had been caused by falling demand owing tokept extending the output cuts they had first announced last October. Then prices fell to $72 in June. The cartel was selling less and less oil, for less and less money.
Bulls also see that supply cuts are filling producers’ pockets, opening the possibility they may be extended again. Despite lower export volumes, Saudi Arabia’s revenues could be $30m a day higher this quarter than last, a jump of 6%, reckons Energy Aspects, a consultancy. Russia’s revenues are also up. Both can take comfort from the fact that, unlike in the late 2010s, whenand Russia first teamed up to cut supply, American shale drillers are not filling the gap.
Yet the bears see things differently. They believe that the recovery in China’s oil demand has already happened, even if that of the economy at large is far from complete, since lockdowns had an outsize effect on activities, such as those involving transport, that are thirsty for oil. JPMorgan Chase, a bank, projects that Chinese demand will be flat for the rest of the year.
Bears also dismiss the depletion of stocks at Cushing, pointing out that, as America became an exporter of crude in the 2010s, storage activity shifted to the Gulf Coast instead. Crude inventories elsewhere have not diminished as fast. Global stocks remain above the five-year average. Although bears agree that these stocks will be drawn down in the forthcoming quarter, they expect the market deficit to shrink fast next year, when non-production growth should cover most of the rise in demand.
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