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Commodity trading giant Trafigura expects a strong rebound in oil demand next year thanks to mass vaccinations, which will push crude oil prices to $55-60 a barrel, Argus Media reported, citing the company's chief economist Saad Rahim.
"You have already seen a strong recovery in many places — certainly in China, but also in Europe and Japan, for example. The United States is lagging in some parts, but I think we can see some stronger momentum. India had taken a major hit, but the momentum there is also looking strong," Rahim told Argus.
China's oil demand has certainly rebounded, with processing rates at Chinese refineries hitting all-time highs in October and November. Indian demand is also firmly on the mend as people opt for personal rather than public transport, boosting demand for gasoline.
Europe, on the other hand, is still battling with surging Covid-19 infections, with several countries recently announcing tighter lockdowns despite the coming holidays to stem the spread of the coronavirus.
Yet Trafigura's chief economist is upbeat about oil's immediate future, noting stimulus measures implemented by European governments and a pending crisis relief package discussed by U.S. lawmakers.
And this is before you have the proper rollout of the Covid-19 vaccines," Rahim also noted.
Interestingly enough, the executive brushed off Libya's addition of more than 1.2 million bpd in oil production to OPEC's total at a time when the cartel is trying to keep output lower to keep prices higher.
"The Libyan volumes have come on very quickly, so they are not really going to add many more barrels there. And the market has absorbed those volumes, meaning that demand is already looking much healthier," he told Argus.
Indeed, depite the inflow of Libyan oil into markets, oil prices have risen over the past couple of weeks despite continued worry about the future of demand. The main drivers of the rally have been positive vaccine news reports and the demand rebound in Asia, notably in China and India.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com