Note from Bloomberg: "Higher oil prices are inevitable"

[dan_s]

There is a myth about Atlas, a man who lost a war against the Greek gods and was punished by holding the whole world on his shoulders. I can't help, but see some resemblance when it comes to Russia, the second largest global oil producer after Saudi Arabia. Today's Chart of the Day shows Russia's combined crude and condensate production, which still hasn't recovered to pre-pandemic levels after its steep drop in 2020. It's no secret that demand for oil (as part of the global recovery) is strong. So strong, that ramping up production is proving difficult, even for OPEC+'s biggest producers.

With American shale companies hesitant to revert back to the "drill, baby drill" mentality of five years ago, the spotlight is on OPEC+ even more. Within the cartel, only Saudi Arabia and the UAE have the capacity to ramp up production to pre-Covid levels. Whereas, Russia, is expected to only be able to meet half of its expected output over the next six months. For investors, economists and even the Biden administration, that's a problem. It means less relative supply in the face of ongoing demand. In other words, higher oil prices are inevitable, which could further eat into disposable consumer income and ultimately company earnings.