Brent crude oil was trading at over $71 a barrel this week, its highest level since May 2019. The latest leg of the rally was due to Opec+, a group of major producers led by Saudi Arabia and Russia. The group has been collectively withholding millions of barrels of daily production from world markets in order to prop up prices. Last week they agreed to maintain their existing plan to unwind those curbs slowly rather than upping production more quickly to take advantage of higher prices.
The surge in crude has also been fuelled by optimism about economic reopening, says Patti Domm for CNBC. America has now entered its summer “driving season”. Reopening economies mean global demand should grow by seven million barrels per day (mbpd) between the first and third quarter, says Daniel Yergin of IHS Markit (worldwide consumption was 91mbpd last year). Even a return of Iranian supply – currently barred by US sanctions – to the world market would be absorbed by the ongoing demand spike. Oil is heading for “a hot summer”.
Not so fast, says The Economist. The higher prices go the more incentive US shale producers have to get back in the game. Floods of US shale oil have kept a cap on previous oil rallies. Higher prices will also encourage individual Opec+ members to cheat on their commitments by pumping more crude than they promised. Opec+ has been disciplined so far; it might not last.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
-
8 of the best houses for sale with outdoor swimming poolsThe best houses for sale with outdoor swimming pools – from a family house in Wimbledon Village, London, to a 1640s mansion in Derbyshire with a heated swimming pool in the grounds
-
Trouble brews in B&M as bargain shops take a hitOpinion Once a stock market darling, B&M's share price has slumped. What has gone wrong for bargain shops?
-
Infrastructure investing: a haven of stable growth amid market turmoilFrom booming construction in emerging markets to digital and green transitions, the infrastructure sector offers security, returns and long-term opportunities
-
The costly myth of “sell in May”Opinion May 2025's strong returns for US stocks have once again shown that putting too much weight on seasonal patterns will only make investors poorer, says Max King
-
Who’s driving Tesla?As Elon Musk steps back from government with his eyes on the stars, investors ask if he’s still behind the wheel at his electric-car maker.
-
Investment opportunities in the world of Coca-ColaThere is far more to Coca-Cola than just one giant firm. The companies that bottle and distribute the ubiquitous soft drink are promising investments in their own right.
-
Streaming services are the new magic money tree for investors – but for how long?Opinion Streaming services are in full bloom and laden with profits, but beware – winter is coming, warns Matthew Lynn
-
'Pension funds shouldn't be pushed into private equity sector'Opinion The private-equity party is over, so don't push pension funds into the sector, says Merryn Somerset Webb.
-
Greg Abel: Warren Buffett’s heir takes the throneGreg Abel is considered a safe pair of hands as he takes centre stage at Berkshire Hathaway. But he arrives after one of the hardest acts to follow in investment history, Warren Buffett. Can he thrive?
-
Who will be the next Warren Buffett?Opinion There won’t be another Warren Buffett. Times have changed, and the opportunities are no longer there, says Matthew Lynn.
