Global oil demand was inflated primarily by the decision of the Organization of the Petroleum Exporting Countries (OPEC) to continue with the 2016-initiated move of cutting daily production by 1.2 million barrels. Apart from this, increasing tensions between Saudi Arabia, Israel, and Iran, as well as political traction in Libya and Nigeria are also creating a geopolitical risk.
Also, the long-term mega projects by energy giants have run short of investments. The US shale producers are unwilling to borrow money to raise production and regulate prices as they have already incurred massive debts trying to do so before. Crude oil demand is expected to be boosted by 2020 as demand for middle distillates increases, driven by shippers.
The increasing oil prices could put massive amounts of pressure on airlines and other companies in the industrial sector. As the prices reach a threshold, there will be an increase in financial market risks, which might kick off a recession.
A recent Bloomberg survey showed that US crude inventories are expected to fall for a third week by 2 million barrels. A decline of 250,000 barrels in the stockpiles is expected at the key pipeline and storage hub in Cushing, Oklahoma. So is a recession on its way? If the prices maintain its pace, bad news may be in store.