Oil markets are predicted to be tight for next year, which means prices will stay elevated. OPEC and IEA forecast a significantly tighter oil market for next year. At the same time, there are also views in the market that the ongoing global recession and contraction in global demand will push prices down next year – a glimpse of which has somewhat been experienced with the recent decline in crude oil prices.

However, it is not possible that IEA and OPEC did not consider the global economic realities while making estimates or a much tighter crude oil market best year. This is also evident from a reduction in the expected demand in IEA’s recent outlook. Their supply estimations most likely include significant growth in demand and robust economic activity, which seem a little less at this point in time.

Another factor they are most likely ignoring is the potential of Iranian oil in the market. But if they have accounted for Iranian oil, which has benefited massively amid high oil prices and incredibly tight supply, demand will get a boost because countries like China, Turkey, Afghanistan, and Russia are more than willing to grow their consumption of Iranian oil. Moreover, many point to OPEC’s lack of incorporating the blow to supply by the decline in Russian crude oil.

Whatever the route crude oil prices take for next year, the highest ever crude oil prices in the current year have been detrimental to the country’s trade deficit which soared to $48.259 billion. While oil and petroleum imports need to be restricted, the domestic oil exploration and production companies have been presented with an opportunity to spur oil and gas production and drilling activities amid a high-price environment. Now that the demand has recovered from its nadir during the early pandemic, oil drilling and exploration companies, particularly in America, are reaping the benefits of high prices to improve their balance sheets.