Oil surge to $80 shows long-awaited market tightening is here

Oil surge to $80 shows long-awaited market tightening is here

Betting on a tighter oil market has been a bad trade for most of this year. But there are signs it’s finally paying off. After languishing for months, crude surged above $80 a barrel in London last week as fuel demand in China and elsewhere recovers from the pandemic to reach new highs. That’s happening just as production cutbacks by Saudi Arabia and its OPEC+ allies are set to rapidly drain storage tanks around the world. “We’re expecting a sharp tightening of the market,” Toril Bosoni, head of oil markets at the International Energy Agency in Paris, said in an interview with Bloomberg television. “As demand increases seasonally, we do think there’s a risk that prices will continue to increase into the third quarter.” Besides rewarding bullish traders, that would boost energy producers from Texas to Moscow. It would also endanger the global economy, which has benefited recently from easing fuel costs and cooling inflation. It’s still far from clear whether Brent crude’s return to $80 a barrel is a turning point that heralds a major price rally. Economic storm clouds still darken the horizon, from shaky Chinese indicators to rising interest rates, and barrels of cut-price crude continue to