Brent crude oil rose above $45 a barrel on Wednesday, as the industry keeps recovering slowly from the demand destruction that the covid-19 pandemic brought.
As we reported earlier, as soon as Pfizer announced a 90% or more effectiveness of its vaccine, oil prices started to rise.
As of yesterday, Brent oil was up $1.07 or 2.5% and closed at $44.68 per barrel, then, on Wednesday, closed a high session to $45.30. This is the first time that prices break the $45 ceiling since early September.
West Texas Intermediate added $1.09 or 2.6% and closed at $42.45. Both contracts rose 3% as of Tuesday. And just for this week, the increase in both contracts, Brent and WTI, was 14%.
“There’s optimism now that there’s light at the end of the tunnel, expectations around the path to economic recovery, and a recovery in oil demand, have changed, and oil prices are reflecting that,” said Harry Tchilinguirian, head of commodity markets strategy at BNP Paribas.
Recommended for you: Mountain Valley Pipeline on hold, judges grant construction stay
Brent recovery expected to continue; experts warn for caution
Giovanni Staunovo, a UBS oil expert, agreed that the vaccine news was also a factor of the oil price recovery: “This week’s news about a coronavirus vaccine was encouraging and, alongside short-covering activity, strongly supported oil prices on Monday and Tuesday.”
He considers that the European new lockdowns, as well as the oil production from Libya, could hit the prices in the short term. Nevertheless, UBS forecast $60 per barrel of oil by the end of 2021, based on the production curbs and a more balanced market.
This optimism is confirmed as Algeria’s Prime Minister said on Wednesday that OPEC is ready to extend oil production curbs well into 2021 and maybe even deepen them.
Saudi Arabia’s energy minister backed the saying as he confirmed that the oil pact with OPEC and its allies could indeed be modified to fit the market’s circumstances.
Nevertheless, for experts such as Vandana Hari, founder of Vanda Insights in Singapore, this optimistic wave should be more careful.
“The giddy risk-on trade of the past couple of days is pricing in a future hope, but not the immediate practicalities and realities of a worsening virus surge on both sides of the Atlantic,” he said, quoted by the Boston Chronicle.