Brent Crude prices hit $60 a barrel early on Monday, rising above that threshold for the first time since the start of the COVID-19 pandemic early last year.
As of 8:54 a.m. ET on Monday, Brent Crude was trading at $60.10, up by 1.28 percent, and WTI Crude was up 1.25 percent at $57.56.
Continued production restraint from the OPEC+ group and the extra cut from the alliance’s key member and world’s top oil exporter, Saudi Arabia, supported oil prices at the start of this week, after oil posted last week its third consecutive weekly gain.
The tightening of the oil market, combined with prospects of a rise in demand later this year with COVID-19 cases now falling and vaccination rates increasing, have been boosting oil prices since the start of February.
The Brent futures curve is also strengthening in backwardation, the state of the market signaling tighter supplies with the prices of the nearer futures contracts higher than those further out in time.
Prompt oil prices are now at more than a one-year high—the last time Brent was above $60 a barrel was in late January 2020.
The tightening oil market and hopes of a large stimulus package in the United States have boosted risk sentiment on the oil market in recent days.
“I would expect that if this package is passed that we would get back to full employment next year,” U.S. Treasury Secretary Janet Yellen said in an interview with CNN on Sunday.
“The strong combinations of tightening supply led by Saudi Arabia’s unilateral decision to cut production in February and March and the prospect for an improved demand outlook with the rollout of Covid-19 vaccines have triggered one of the strongest starts to a year on record,” Saxo Bank said in a market commentary on Monday.
“Adding to recovering fundamentals the markets are also seeing continued inflows from macro-orientated funds seeking a hedge against inflation,” the bank’s strategy team noted.
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By Tsvetana Paraskova for Oilprice.com
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Crude oil prices have been since then trending upwards underpinned by improving fundamentals in the global oil market, almost 100% compliance by OPEC+ members with the agreed production cuts, an expanding global rollout vaccination and accelerating depletion of global oil inventories in addition to growing demand for refined products in the United States and record-breaking crude oil imports by both China and India.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London