In the midst of rising coronavirus cases with many economies under the third spell of the virus, the general trend in global crude oil prices is an upward climb. After sinking to its bottom almost a year ago, crude oil prices have recovered; albeit slowly. And the recovery has not been without bumps and jolts.
The recent upswing is largely being driven by the intensified reopening of businesses in the US, which is having a ripple effect on the optimism in other markets as well. Oil prices have been enjoying the effects of economic optimism in the US with strong hiring data. While the overall positive projections for the prices have also been fueled by an equally important economy – China posting strong recovery data. And then the vaccine rollout – though not as smooth as it had been anticipated to be – particularly in the western economies has been a fillip of hope for the oil prices.
Energy Information Administration (EIA) is also very optimistic about oil demand growth. In its Short-Term Energy Outlook for April earlier this week, it has raised global oil demand growth forecast by 200,000 bpd to 5.5 million bpd. OPEC+, which is less conservative than EIA, had forecasted 5.9 million bpd in its March Monthly Oil Report. Global bankers are seeing a steady increase in oil prices due to returning of manufacturing activity along with accelerated vaccination drives and targeted governemnt stimuli to address the challenges posed by COVID-19. And most analysts too have sanguine hopes for economic recovery in 2HCY21, which further solidifies the belief in crude oil price growth.
On the flip side, covid infection numbers are still rising across despite the vaccination drives and the reopening of economies. Recent slide in oil prices was also brought by as OPEC+ decided to increase output from next month. While another downside to the oil prices could be the expected de-escalation efforts to ward off tension between the US and Iran with fears of flooding the oil market with Iranian oil eventually.
While global recovery remains fragile, it’s safe to assume that the long-term growth in oil demand will inch up in the medium to long term, while the short-term growth hiccups and jolts will continue to address the volatility in the global economy.