Both the Federal Reserve and OECD have published significant revisions in the past week, which are expected to have positive spillover effects on the US trading partners like Europe and Canada. The main triggers have been the $1.9trn fiscal stimulus package and the successful rollout of vaccines in the country. However, looking at the global demand picture, it’s still very uneven. Europe, which only started to reopen its economies a few weeks ago, is again talking of lockdowns. As long as we don’t have the virus fully under control, at least in the major economies, we will continue to have uncertainty on demand, supply and prices.
We are also seeing a dichotomy developing on expectations for inflation, compared to what we had last year. The Fed is saying we might see a rise in inflation this year which is expected to go back to normal in 2022, while other voices are expressing longer term concerns. The same goes for oil prices. We are seeing divisions between traders and stronger voices arguing that we are heading towards $100 and into a commodities super cycle. Meanwhile, international agencies, like the IEA, view the market as comfortably balanced for the next few years.
“New Opportunities 2021: Some optimism for oil markets“, Dr Carole Nakhle, Feb 2021
“Global Economy and Energy Markets Weekly Commentary – 14th Mar ‘21“, Christof Rühl, Mar 2021
“Oil markets and volatility in prices“, Dr Carole Nakhle, Mar 2021