Bank of America analysts caution that traders shorting crude oil may be stepping into a bear trap, as energy demand is poised to potentially rebound next year. In a recent report, they observed that many traders anticipate continued weakness in oil prices, influenced by concerns over declining demand in China, a possible OPEC+ price war, and ongoing global economic challenges. However, the analysts argue that energy demand could actually rise significantly, fueled by strengthening economic growth and what they describe as “the next productivity revolution.”
They emphasized the critical intersection of artificial intelligence (AI) advancements and energy needs, noting that AI’s substantial energy requirements clash with climate change initiatives, particularly given the intermittent nature of renewable sources like wind and solar. As AI developments in major tech companies accelerate, the demand for natural gas is expected to increase as a cleaner yet reliable energy source, likely driving U.S. electricity demand growth from a modest 0.2% to 2% over the next seven years.
Furthermore, the analysts project a global GDP growth rate of 3.3% next year, accompanied by a 3% increase in global energy demand. They highlight that this surge cannot be met solely by non-hydrocarbon sources, indicating a likely rise in the demand for hydrocarbons, particularly oil, which may lead to higher prices.
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