It's unclear whether OPEC will be willing or able to offset supply shortages: File Image/Pixabay
All signs indicating that demand for oil will soon outstrip supply in many countries resulted in more gains for crude prices on Friday, with West Texas Intermediate posting a sixth straight weekly gain - the longest winning streak since early July.
West Texas Intermediate rose 85 cents to settle at $75.88 per barrel (futures rose 2.6 percent this week), while Brent rose 97 cents to settle at $79.28 per barrel.
China's decree to state-owned companies to secure energy supplies for winter continued to support prices, as did JP Morgan Chase & Co. observing that growing natural gas crunches in Asia and Europe will spur a large-scale switch to petroleum-based fuels - which could cause Brent to climb to $84 per barrel by year-end.
Bank of America
We may just be one storm away from the next macro hurricane
Fiona Cincotta, senior financial markets analyst at City Index, summarized the projected situation over the next few months succinctly: "The expectations of future demand are strong."
But unlike the previous oil price rally due to post Covid lockdown demand, crude's current market clout is a source of major worry for experts: on Friday Bank of America warned that the energy crunch (which it notes is also aggravated by higher aviation demand as the pandemic recedes) could propel oil prices above $100 and diesel above $120, thus spurring a global economic crisis.
The bank stated in a note, "If all these factors come together, oil prices could spike and lead to a second round of inflationary pressures around the world; put differently, we may just be one storm away from the next macro hurricane."
As for the duration of higher prices, the bank added, "A multiyear run up in crude oil prices is now in the cards" due to under investment in commodities.
The big question asked by investors on Friday is whether on Monday the Organization of the Petroleum Exporting Countries (OPEC) will decide to increase output after reviving its production by 360,000 barrels per day (bpd) in September.
And should such a decision be made, it's unclear how quickly the cartel can ramp up output, given that members such as Angola and Nigeria are struggling to revive production due to operational disruptions and under investment.