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ERBIL, Kurdistan Region — Oil prices have edged closer to $75 per barrel, the highest in more than two years as the global market continues to recover.
A barrel of Brent crude oil sold for more than $74.50 on Wednesday morning, the highest price since April 2019, as global demand for oil grows.
“The crude demand outlook is very robust as recoveries across the US, Europe and Asia, will have demand return to pre-COVID levels in the second half of next year,” analyst Edward Moya told CNBC on Wednesday, adding that even non-energy traders are placing bets on the increase in oil prices.
In its June report, the International Energy Agency (IEA) said global oil demand is set to return to pre-pandemic levels by the end of 2022.
Oil prices plummeted last year as the global market shrunk amid the COVID-19 pandemic.
A barrel of Brent oil sold for less than $20 in April 2020 as a result of a price war between major oil producers Russia and Saudi Arabia, and a crash in global demand for oil because of the pandemic. Prices struggled to bounce back for most of 2020 as the pandemic persisted.
With the start of the vaccination process in many developed countries, the price of oil has been on a rise.
During the 17th ministerial meeting held earlier this month between the Organization of the Petroleum Exporting Countries and its allies (OPEC+), Secretary General Mohammad Sanusi Barkindo said he expected demand for oil to grow by 6 million barrels per day (bpd), with a further increase expected as global markets slowly open up amid ongoing COVID-19 vaccination campaigns.
OPEC+ has confirmed output will continue to increase as per an April decision, which ruled that production would grow by almost two million bpd between May and July. Production rates were initially cut in April of last year, with the outbreak of the coronavirus.
As demand is increasing and OPEC+ has started a gradual easing of production cuts, whether supply will catch up with demand seems to be a major question, but the IEA believes that supply will catch up just fine.
“Meeting the expected demand growth is unlikely to be a problem. Even after boosting oil production by around 2 mb/d over the May-July period, OPEC+ will have 6.9 mb/d (million barrels per day) of effective spare capacity,” the IEA said. “If sanctions on Iran are lifted, an additional 1.4 mb/d could be brought to market in relatively short order.”
Iran’s 2015 nuclear deal with world powers allowed it to sell crude oil on the international market, but former US President Donald Trump withdrew from the accord in 2018, forcing Iran into clandestinely taking its oil abroad and selling it, likely at a major price markdown. Talks in Vienna are ongoing to try and revive the deal, and appear to be making progress.
Iran’s oil minister said late last month that they “can easily achieve a daily production of 6.5 million barrels,” a rate that Iran has not reached since before the 1979 Islamic revolution.
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