LONDON/NEW YORK/SINGAPORE – With oil prices surging as producers curb supply, fuel prices in many countries have hit multi-year and even all-time highs despite the pandemic knocking demand by millions of barrels per day.
The high prices at the pump could hamper a slow and fragile economic recovery as they contribute to inflation and strip consumers of cash to spend, especially in developing countries where the impact of the pandemic remains acute.
Oil prices have risen by more than 30 percent this year. Still, OPEC+, which groups oil producers from the Organization of the Petroleum Exporting Countries and others, is holding back on raising supply, wary about risks to economic recovery needed to support a rebound in fuel demand.
Yet by standing firm and not easing its output curbs, OPEC+ may be contributing to the slow recovery by pushing up prices, Standard Chartered said in a report.
“It is … extremely risky in its assumptions that high prices will not significantly affect economic recovery (and) oil demand recovery,” the bank said.
Benchmark Brent crude oil futures rose above $71 last week, their highest level since January 2020 before the pandemic started. That was as high as levels seen after attacks on Saudi oil facilities in 2019.
Similarly, pump prices are at or near pre-pandemic levels in 25 countries which account for 80 percent of global fuel demand, according to energy consultancy FGE.
This, despite still weakened demand. Global oil demand fell by almost 10 percent due to the pandemic in 2020 from more than 100 million barrels per day (bpd) in 2019.
Even with improvement through 2021 demand in the final quarter is likely to remain 1.4 million bpd lower than the same period in 2019, the Paris-based International Energy Agency has forecast, while OPEC sees the shortfall at some 2 million bpd.
