Fossil fuels have suffered over the past year as a COVID-induced fall in energy demand compounded longer-term pressures on the industry. At the same time, however, many people have decided a car offers a safety bubble in the pandemic, supporting a resurgence in sales—most of them still petrol-powered.

Oil markets are caught between these two notions: one bearish, the other bullish. In the year ahead, bulls should win out. When that happens, look for inflation expectations to rise, sending bond prices lower and yields higher.

Crude prices have swung wildly over the past six months. A collapse in oil consumption sent the market into a deep slump before the world’s largest producers agreed to slash output to adjust to the new reality. Supply and demand have this summer again found an equilibrium.

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