Why energy supplies may be impacted longer term
There are several reasons why oil and gas prices are not likely to fall back to pre-conflict levels soon—despite efforts to ease global supply constraints. For example, last month, the 32-nation International Energy Agency agreed to release a record 400 million barrels from strategic reserves to offset disrupted supplies. In addition, the White House suspended a law that restricted oil shipments in foreign tankers and eased sanctions on oil from Russia and Venezuela.
Fernandes contends these steps don’t fully offset blocked shipments in the near term and set the stage for ongoing, longer-term supply tightness. That’s because the US and other nations will need to replenish reserves over the course of 12 to 24 months, creating additional demand.
OPEC, meanwhile, is likely to hold production relatively steady in the coming months, offering little relief to tight global supplies. US production of oil from shale, which had grown steadily for about 15 years, is likely reaching its peak, he says. And while many forecasters anticipated declining demand for global oil and gas, that demand instead has remained strong.
“In my view, it all equates to a more bullish outlook for oil,” says Fernandes, who observes the impact of supply disruptions in the region could also ripple across fertilizer, food, and industrial markets.