Demand Continues to Outweigh Market Supply as Oil Prices Surge

The demand for crude oil in the commodity market continues to grow with oil prices reaching $84.00. However, declining investments as well as reduction in production capacity has plunged supply rate.

Brent crude futures were up 42 cents, or 0.5%, at $84.14 a barrel at 12:11 GMT. U.S. West Texas Intermediate (WTI) crude futures were up 60 cents, or 0.7%, to $81.82 a barrel.

Analysts says governments will be reluctant to impose Covid-19 restrictions, resulting from the increasing cases of the omicron coronavirus variant because of the disastrous impact it had on global economy and world trade.

OANDO analyst, Jeffrey Halley “Assuming China doesn’t suffer a sharp slowdown, that Omicron actually becomes Omi-gone, and with OPEC+’s ability to raise production clearly limited, I see no reason why Brent crude cannot move towards $100 in Q1, possibly sooner,”

The Organization of the Petroleum Exporting Countries (OPEC) and its allies (OPEC+), are gradually relaxing the output  initiated after demand declined in 2020.

However, many smaller producers can’t raise supply and others have been wary of pumping too much oil in case of renewed COVID-19 setbacks.

With the prospect of depleting crude inventories and low spare capacity by the second half of 2022, and limited investments in the oil and gas sector, the market will have little margin of safety, the bank said.

Standard Chartered has raised its 2022 Brent forecast by $8 to $75 a barrel while J.P Morgan predicts oil prices to rise to $90