After a rough year, oil prices are looking at better days.
This according to former Shell Oil President John Hofmeister, who told “Mornings with Maria” on Monday that he predicts there will likely be a “healthy price increase” in oil later in 2021 or in 2022.
“People have a pent-up desire for mobility,” Hofmeister stressed, adding that he believes demand for oil will reach “pre-COVID levels” and “as that comes back, we'll see a strengthening of the oil price.”
As the coronavirus pandemic forced the U.S. economy to a grinding halt and kept most workers at home, mobility dropped off, taking about "10% of demand" away from the industry, he noted.
“People have a pent-up desire for mobility and I think when that mobility starts to return, whether it’s commuting to the office or whether it’s traveling for business or traveling for pleasure, I think everybody’s going to feel better and do better and I think that will take the demand of oil actually back to the pre-COVID levels," he added.
In April, as the coronavirus pandemic raged, there was a historic selloff in the price of oil in the wake of a supply wave that had left the world awash with crude and running out of places to store it.
West Texas Intermediate crude oil futures for May delivery, crashed 305% to -36.73 a barrel in April, as traders unloaded positions ahead of the May contract's expiration.
Amid recent signs of progress on a COVID-19 vaccine, however, oil prices have rebounded a bit.
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FedEx began shipping the second coronavirus vaccine candidate to earn emergency authorization in the U.S. last week after Moderna, a Massachusetts-based biotech company, received the authorization for its vaccine candidate from an FDA advisory panel.
On Dec. 14, the first shots of Pfizer and BioNTech’s coronavirus vaccine were administered, with the initial jabs of the country’s nearly 3 million doses going to health care workers in several states.
Hofmeister acknowledged that he believes that “it’s going to be more of a trickle-up” and that he doesn’t think there will “be a sudden demand increase.”
“But keep in mind one of the realities of the oil market is that the major investing companies, the producers, they’ve cut way back on capital spending so as the demand increases, the capital spending to increase production is basically not there,” Hofmeister noted.
“That’s going to put pressure on the existing supply chain and so I think we will see maybe later this year, probably in 2022, probably some pretty healthy price increase.”
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|USL||UNITED STS 12 MONTH OIL FD LP UNIT BEN INT||21.18||-0.57||-2.62%|
On Monday, West Texas Intermediate crude oil, the U.S. benchmark, slid 9 cents to $48.14 per barrel.
FOX Business’ Jonathan Garber, Evie Fordham and the Associated Press contributed to this report.