Brent Crude hit $50 a barrel on Thursday morning for the first time since oil prices crashed in early March, as hopes of swifter-than-thought vaccine rollout fueled bullish expectations of strengthening oil demand early next year.
As of 10:35 a.m. ET, Brent Crude was rallying by 3.56 percent at $50.60. The price of Brent reached the $50 a barrel threshold for the first time since the first days March, when Saudi Arabia and Russia broke up the previous OPEC+ pact, contributing to massive slides in oil prices exacerbated by the demand crash in the lockdowns in the spring.
The WTI Crude price also hit its highest level since the price crash, and traded at $47.23, up by 3.82 percent on the day.
Oil prices were boosted by Canada approving the Pfizer-BioNTech vaccine, joining the UK. Canada’s health authorities approved on Wednesday the vaccine, and the first doses of the vaccine are expected by the end of this year.
The UK has already started vaccinating vulnerable people and essential personnel, and the first person in the UK received the Pfizer vaccine on Tuesday.
Hopes of faster-than-expected vaccine releases turned the oil market sentiment bullish on Thursday, even after the EIA reported on Wednesday a massive crude oil inventory build of 15.189 million barrels for the week to December 4. This rise in crude inventories came close to the largest crude build ever, which was recorded earlier this year for the week ending April 10, when the EIA reported a 19.25 million barrel inventory build.
On Thursday, the market was already ignoring the massive build last week, due to the vaccine hopes and signs that oil demand in Asia continues to recover and be a bright spot on the market. Indian Oil Corp, the biggest refiner in the world’s third-largest oil importer, said its refineries operated at 100-percent capacity in November, for the first time since the pandemic started, in order to meet growing domestic fuel demand.
By Tsvetana Paraskova for Oilprice.com
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And the reason the market ignored a massive build-up of 15.189 million barrels in US crude oil inventory is that it doesn’t believe announcements by the US Energy Information Administration (EIA) about oil inventory build-up figures and by extension US shale oil production and US crude oil export figures either.
And with the expansion of the global vaccination campaign oil prices could be expected to hit $60 in the first quarter of 2021 rising to $70-$80 by the third quarter.
Those who have been prematurely and flippantly saying that the pandemic has brought peak oil demand closer should think again and accept that this is a myth promoted by militant environmental activists and hydrocarbon asset divestment campaigners and also vested interests.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London