Bank of America analysts have issued a warning that traders betting against crude oil could be stepping into a “bear trap.” They believe that energy demand may change direction next year.
In a recent report, analysts noted that many traders expect oil prices to stay low or even decline further in the near future. This expectation stems from concerns about weakening demand in China, the possibility of a price war among OPEC+ countries, and ongoing challenges in the global economy.
However, the analysts suggested that these assumptions might be misguided. They pointed to what they call “the next productivity revolution,” predicting that energy demand will significantly increase as economic growth strengthens.
“For all the bearish concerns out there, we believe global energy consumption will likely accelerate as the next productivity revolution unfolds,” the analysts stated.
They emphasized the important link between artificial intelligence (AI) development and energy needs, noting that the clash between AI advancements and climate change efforts revolves around energy supply.
AI’s rapid growth is expected to intensify demand for energy, particularly for natural gas, which is seen as a cleaner alternative to coal. This demand is crucial because AI requires reliable, dispatchable energy—something that wind and solar power may not always provide. Bank of America forecasts that AI-related growth will increase U.S. electricity demand from a modest 0.2% to 2% over the next seven years.
The analysts also predict a global GDP growth rate of 3.3% for next year, alongside a 3% increase in global energy demand. They argue that this surge in demand cannot be met by non-hydrocarbon sources alone, suggesting that the need for hydrocarbons, particularly oil, will rise, which could drive prices higher.
You Might Be Interested In
- How to Become a Crude Oil Broker: A Detailed Guide
- How to Buy Oil by the Barrel: A Detailed Guide for Buyers
- Why Do People Buy Oil Stocks?