(Montel) The Brent crude oil benchmark rose above USD 50/bbl for the first time since March on Thursday afternoon, buoyed by hopes that more countries will soon roll out a coronavirus vaccine, accelerating global oil demand recovery.
“Seeing prices moving up again today over [USD] 49 is a clear indication of the increasing market confidence towards vaccine campaigns,” said Rystad Energy’s head of oil markets, Bjornar Tonhaugen.
“Traders welcomed indications that vaccinations campaigns will start in the US and Canada in the next few days, a development that – adding up to the UK’s roll-out – is way quicker than most of the world expected just weeks ago,” he said in a note.
“Fast-tracking vaccinations is raising hopes that oil demand will benefit quicker and the North American markets are major consumers.”
The UK begun its wide-scale vaccination programme this week, while the US and Canada are expected to soon follow suit. Elsewhere, China and Russia have started to roll out their own domestically produced vaccines.
Oil prices have risen more than 30% since the start of November, although the Brent benchmark remains around USD 20 below pre-pandemic levels seen early in January.
Apart from the optimism related to coronavirus vaccines, Rystad Energy’s Tonhaugen also attributed the increase in oil prices to last week’s decision by Opec and a group of Russia-led producers to gradually increase supply by just 0.5m bbl/day from January, tapering their current production cut of 7.7m bbl/day.
The so-called Opec+ group had agreed earlier this year to boost supply by around 2m bbl/day from the start of 2021, although the group changed course due to a surge in coronavirus cases and tightened lockdown restrictions seen this autumn.
Yet analysts at Commerzbank pointed out oil prices continued to face headwinds, particularly as demand remained relatively weak in the face of rising global supply and robust stockpile levels.
“We recently highlighted the excessive optimism among oil market participants, which is likely to have driven up oil prices despite all the risks,” they said in a research note.
“It seems that cheap money [low interest rates], good sentiment on the stock market and hopes that demand will soon normalise thanks to corona[virus] vaccines count for more than the reality.”