Line chart shows a volatile relationship between Brent oil prices vs. global oil demand/supply balance.
Left y-axis: Global demand growth minus supply growth (%) YoY (12-month average); right y-axis: Brent crude price (U.S. dollars per barrel); x-axis: 2002 – 2022.
Brent crude rises from about $19 per barrel in 2002 to a peak of roughly $140 per barrel in 2008. Since then the price has fluctuated considerably, ending at about $66 per barrel by year-end 2019. From there it fell sharply to less than $23 by March 2020, eventually recovering somewhat to nearly $52 by year-end 2020. As of Q1 2022 it stood at about $108. Global demand growth minus supply growth also fluctuated, beginning at about 1.00% in 2002 and ending just under 0.99% at the end of November 2020. As of the end of February 2021 it had increased to about 2.4%.
Historically, global demand growth minus supply growth rose to five peaks during this time period, in 2002 (over 2.2%) 2007 (over 1.9%), 2013 (over 1.7%), 2017 (over 2.1%), and 2021 (near 5.6%). Each of these peaks was followed by steep declines, to about -2% (2004), near -2.2% (2009), -1.6% (2015), about -1.7% (2019), and 2.4% (February 2022).
Sources: Bloomberg, Energy Information Administration, and Wells Fargo Investment Institute. Brent crude oil: monthly data from January 1, 2002 to March 31, 2022. Global demand/supply growth: monthly data from January 1, 2002 to February 28, 2022. YOY = year-over-year.
- The rate of change of demand growth versus supply growth has had a strong influence on oil prices.
- Global oil producers were hesitant to bring extra production back in 2021. Combined with persistently growing demand, we suspect oil prices could spend much of the next two years above $90 per barrel.