Oil was one of the commodities that were hardest hit during the pandemic. Brent price fell below $20 per barrel within 2020, as global demand for oil dropped dramatically due to travel bans and lock-downs that kept most people indoors for the greatest part of the year. WTI crude even reached negative prices within the year, as distributors started to run out of storage space. Even though worldwide distillation capacity has been increasing, big oil distributors chose to limit their output in an attempt to curtail the price drop. The Organization of the Petroleum Exporting Countries (OPEC+) induced drastic production cuts and reduced oil inventories in an attempt to increase oil price.
In January 2021, the price of Brent oil was over $45 per barrel and started to climb again, bolstered by OPEC+ output policies and news of the vaccination programs that were starting in many countries. As mobility restrictions and travel bans were been lifted throughout the globe, demand for the commodity started to rise again in early 2021. Oil price exhibited an uptrend for most of 2021, regaining the ground lost in the previous year. Until the summer of 2021, OPEC+ has been gradually increasing oil output, but in mid-summer there was a great deal of discord within the group, leading to uncertainty about oil production and output.
At the end of September, brent crude climbed to above $80, its highest price in three years. The autumn and winter seasons historically see a rise in the price of oil, as the cold weather drives demand up. The Biden administration has expressed great concern over the rising price of oil and in the past couple of months has been attempting to reach a compromise with OPEC+ to gradually increase output and drive oil price down. While initially Biden’s overtures were rejected by OPEC+, the organization eventually agreed to gradually increase its output in early December. At the end of November 2021, brent price plunged, recording its biggest one-day loss since April 2020 on November 26th. Reports of the emergence of the Omicron variance of the coronavirus spread fears of renewed restrictions and lock-downs, driving oil price down. In mid-December, there was high volatility in the price of oil driven by changing OPEC+ output policies, as well as by investor reactions to fresh coronavirus concerns, and WTI closed at a little over $75 at the end of the year.
In future years, fossil-fuel demand might slow down, as countries seek to limit emissions to fight climate change and turn towards renewable energy sources. In November 2021, the 26th edition of the United Nations Climate Change Conference in Glasgow, known as COP26, formally recognized the need to put an end to fossil fuels. Even though that end is not yet in sight, many countries have pledged to reduce their dependency on fossil fuels, while other countries, such as Denmark, have set plans to eventually cease fossil fuel production. During the COP26 summit a new alliance was formed, the Beyond Oil & Gas Alliance (BOGA), which will seek to deliver a managed and just transition away from oil and gas production.
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