Oil prices rose this Thursday as economic recovery hopes are getting stronger, despite the rapid spread of the coronavirus disease and its new string, Delta. A sharp decline in the U.S. crude stocks and a weaker dollar were also factors for the increase.
According to Reuters, Brent crude was up $1.25, or 1.8%, at $72.84 a barrel; while the U.S. mix, the West Texas Intermediate (WTI) crude rose $1.39, or 2%, to $69.98. Other economic indicators in the U.S. strengthen oil prices, like the number of Americans applying for jobless benefits fell last week.
Also, layoffs dropped to their lowest level in more than 24 years in August, suggesting the labor market was charging ahead even as new COVID-19 infections surge. Tamas Varga, an oil analyst at London brokerage PVM Oil Associates, confirmed it by saying. “Although oil is lagging equities, its downside is clearly limited by the general confidence surrounding the global economy despite consistent fears of the prolonged spread of the coronavirus.”
On the other hand, gasoline demand is on the rise; specifically in India, it will hit a record during the current fiscal year. Fuel consumption will accelerate as mobilization restrictions are lifted and more people travel by road or by air.
Also recommended for you: Westinghouse Electric signs historic nuclear agreement with Ukraine. Click here to read.
OPEC to maintain oil production increases
In fact, in the United States, crude inventories dropped by 7,2 million barrels last week, according to a report by the Energy Information Administration. This is mainly attributable to more robust demand but also to the havoc related to Hurricane Ida, which affected around 90% of the Gulf of Mexico oil and gas production.
Commerzbank analyst Carsten Fritsch, said about the matter. “Crude oil processing will probably take considerably longer to recover from the outages than crude oil production, which suggests that crude oil stocks will increase in the coming weeks.”
Finally, the optimism on economic recovery hit the Organization of Petroleum Exporting Countries (OPEC) as well. On Wednesday, OPEC agreed to maintain the gradual phasing out policy regarding production output. Consequently, the Organization will increase 400,000 barrels per day of production each month until production curbs are fully phased out.