Oil prices finally seem to be attracting the kind of support they needed to break the 10-month long $50 a barrel barrier. Many positives have converged close to the end of the year, taking the sheen away from the horrors of April and May. As coronavirus vaccination begins and is expected to gather pace in the developed markets, there is a sense of calm and clarity among traders.
What also seems to have fueled more hope is the ever-increasing likelihood of the US congress finally reaching a stimulus bill aimed at boosting the US GDP, which should ideally result in significantly increased oil demand than what was earlier projected. The gasoline demand across the US, South America and Asian economies has also reached new highs – despite the rather dismal state of affairs in the European region. This is also likely to keep oil stable, if not rally towards new highs.
The euphoria can be seen in the value stocks and metal commodities, which is mirroring in the oil price trends. Skeptics, however, have cautioned to take the signs of recovery with a pinch of salt, as the sustainability is still in question. While the vaccine rollout has started, the world is still a few more months away from a Covid-free world, and that should still continue to carry a sizeable discount.
Recall that OPEC has very recently issued revised demand forecast for 2021 and that does not read a very promising tale. This however, is taken by some corners as a positive sign, as it would likely further delay any plans of easing the production cuts. OPEC too has given signals to this extent that the group would don’t hurry onto easing supply, and that should keep the oil momentum going.
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