The trend which saw oil prices hit their highest level in July in more than two years amid a surge over the last year was not foreseen by most analysts and experts, many of whom expected a more modest recovery from the pandemic’s impact. During the newest wave of COVID-19, last year’s forecasts did not envision a full recovery of oil demand, which could lead the benchmark Brent crude oil price to reach mid $70 per barrel. During a recent OPEC+ meeting, the United Arab Emirates objected to the plan for an extended easing of production cuts, promoted by Saudi Arabia and Russia. The discrepancies among OPEC’s members, due to national production outputs set by the agreements, led to an impasse, signaling more profound regional tensions between the two Gulf powers. Once Saudi Arabia gave in on the Emirates’ push for ensuring a higher amount, the crisis was resolved, as both the conflict and its resolution had a significant adverse impact on the oil price.
The volatility of the market generated by several factors causes forecasts to differ among institutions. All three of the world’s main forecasting agencies—OPEC, the International Energy Agency and the U.S. Energy Information Administration—expect a demand-led recovery to pick up in the second half of 2021, while Goldman Sachs sees Brent prices averaging roughly $80 in the third quarter, with potential spikes “well above” that level. Meanwhile, J.P. Morgan expects crude oil prices to “decisively” break into the $80 range during the final three months of the year.
How would the uncertainties regarding the COVID-19 pandemic and the Delta variant impact the energy markets? What impacts have the delayed JCPOA talks and tensions among OPEC members on supply and price? Does it add to the difficulty of accurately forecasting the medium/long-term trend? What are the impacts on the economic recovery from the pandemic and inflation?
Featured speakers: Rachel Ziemba (moderator), Professor Brenda Shaffer, Abhiram Rajendran, and Neil Atkinson.
