Oil prices rose early on Tuesday along with rallies in other commodities and equities globally, following encouraging economic reports out of the United States and China and increased forecasts for the global economy this year and next.
As of 9:37 a.m. EDT on Tuesday, WTI Crude was back up above $60 a barrel, rising by 2.42 percent at $60.06, and Brent Crude was up by 2.17 percent on the day at $63.50, also helped by weakness in the U.S. dollar.
The weaker dollar and strong economic news out of the world’s top oil consumer, the United States, and the world’s top oil importer, China, helped oil prices to recover on Tuesday some of the losses from Monday.
Yesterday, crude oil prices slumped by nearly 5 percent, weighed down by record-high new COVID cases in a major oil importer and consumer, India, and continued lockdowns in large European economies such as Germany and France.
On Tuesday, stocks hit record highs in the MSCI All Country World Index, after the Institute for Supply Management said on Monday that the U.S. Services PMI for March registered 63.7 percent—an all-time high for the Services PMI. This came four days after the manufacturing report from the same institute showed the highest monthly growth rate for factories since 1983.
In China, the services sector expanded at the fastest pace in three months in March as optimism among firms jumped to a 10-year peak, the Caixin China General Services Business Activity Index showed on Tuesday.
In addition, the International Monetary Fund (IMF) lifted its global economic growth forecast to 6 percent this year and to 4.4 percent in 2022 in its April World Economic Outlook (WEO) published today.
“The projections for 2021 and 2022 are 0.8 percentage point and 0.2 percentage point stronger than in the October 2020 WEO, reflecting additional fiscal support in a few large economies and the anticipated vaccine-powered recovery in the second half of the year,” the IMF said.
By Tsvetana Paraskova for Oilprice.com
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There is, however, some concern about a slowdown in economic growth in the European Union (EU) triggered by the reintroduction of lockdowns in some of Europe’s biggest economies.
Still, Brent crude could be projected to hit $70-$80 a barrel in the third quarter of 2021 and average $65 during the year with global oil demand retuning to pre-pandemic level of 101 million barrels a day (mbd) by the middle of the year.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London